When people ask me what I do and I tell them I run a credit card comparison site, they generally look away, as if I’ve just said I’m a pimp. Or a crack dealer. Or a crack-dealing pimp. When I tell them credit cards aren’t all bad, they’re skeptical. You probably are, too. I might not be able to change your mind, but if one less person in the world thinks I’d give cigarettes to an asthmatic, this post will have been worth it.
Used properly, credit cards can offer you some real benefits. (Yes, used poorly they can ruin your life, but that’s been established elsewhere. I’m here to give you a few positives.)
Before his trip abroad, J.D. mentioned getting his first credit card in a long time. He talked about the dangers of doing so, but he also exhibited what I’d consider the mindset of a responsible credit card user. This mindset can be summed up in a single sentence, which you should make your credit card mantra:
“I pay off my credit cards on time every month.”
Follow that simple rule and credit cards will be your best friends, keeping you cool in the summer, warm in the winter, etc. When you have made paying off your bill completely each month a given, instead of an option, or a wish upon a star, you have the mindset to take advantage of the two main benefits of credit cards: (1) convenience and (2) protection. Let’s look at each.
Convenience Walking around with a lot of cash leaves you vulnerable. Vulnerable to losing it, vulnerable to having it stolen. And it requires repeated stops at ATMs when you run out, which can be a major hassle. Credit cards solve this problem. You can use them almost anywhere today, for even the smallest purchases.
In addition, credit cards are often necessary for travel, especially if you book airline flights online or want to make advance reservations for a rental car or hotel. In many cases, you simply can’t do these things without a credit card. At best, it’s a hassle. Maybe that’s fair, but it’s reality.
Also, when you travel abroad, as J.D. has just done, a credit card allows you to make purchases more easily and often more cheaply, without having to pay international ATM fees or deal with travelers checks.
Protection If you lose your credit card, or someone steals it and hits the bars, your credit card company can not legally make you liable for any more than $50 of those fraudulent charges; in reality, most credit card companies won’t charge you at all, because they want to keep you as a customer.
Credit cards also protect you as a buyer. If you make a purchase and the item breaks, or is lost while being delivered, or a company won’t give you a refund, your credit card company will go to bat for you. Call them up, say you want to dispute a charge on your card, tell them why, and in most cases they’ll erase your debt and go after the merchant that stiffed you. Now it’s between them—as far as you’re concerned, the matter is over.
But Wait! There’s More!: Bonus Benefits There are two more fringe benefits to consider, although I believe they are less important.
Over 75% of the credit cards on the market today offer some sort of rewards program, whether it’s getting a small percentage of cash back, points toward merchandise and gift cards, or airline miles. In most cases, these reward programs are free—you don’t pay an annual fee to get them. So, as long as you are following your mantra (“I pay off my credit cards on time every month.”), you get free stuff for using your credit card. These rewards can be lucrative if you’re a big spender, but I suggest you only think of them as fun extras; otherwise you can become obsessed with racking up points and do something stupid with your credit card.
Credit cards are a free short-term loan. While I don’t suggest you think of them as free money, I do suggest that you think of them as a convenient way to save yourself from forking over big wads of cash for no reason. Example: You want to book a flight today, while rates are lower, for a vacation that won’t occur for two months. If you even have the option to pay cash, it will mean paying an awful lot upfront for something you won’t be using for a while. A credit card lets you make that purchase quickly and easily, with no interest for the month in between when you bought the ticket and when your credit card bill is due.
Credit Cards’ Evil Ways If you think I’m a shill for credit card companies, let me set you straight by telling you this: Credit card companies want you to screw up. They want you to forget your mantra. They want you to pay off only part of your balance, pay it late, maybe even go over your credit limit. When you do, they’ll pounce, gleefully charging you out the wazoo for each mistake and showing no mercy when you say “It’s never happened before” and “Can’t you make an exception this one time?” These days, credit card companies are making less and less money from interest charges and more and more from fees, so they need you to screw up.
The solution: Don’t screw up.
A Word About Debit Cards Debit cards have increased in popularity, especially among younger people. If you can’t internalize the mantra “I pay off my credit cards on time every month,” then by all means go for the convenience of a debit card and the protection from buying what you can not afford.
However, three words of caution on debit cards:
Debit cards do not offer the same protections as credit cards. First, they offer little extra benefit if you have a dispute with a merchant. Debit card purchases are treated the same as if you made a cash purchase. You may get your bank to help you, but who has your money? The merchant, who is under much less pressure to give it back.
If debit cards are lost or stolen and used fraudulently, you could be charged much more than you would be for a lost credit card—only $50 if you report it within two days, but after that up to $500, depending on how much the card was used. (After 60 days, you’d have to totally eat the fraudulent purchases, but who would not know their debit card was stolen for 60 days?) In addition, if you try to use your card while you are unaware that someone is fraudulently emptying your bank account, this could lead you to make purchases without money in the bank to cover them, leading to the equivalent of bounced check fees. And, of course, when your debit card is used fraudulently, your money is gone from your bank account, and it may be weeks before the situation is handled and the money is restored. Contrast that with a credit card, in which the money you’ve used to make purchases is the bank’s money, not your own, so you do not lose cash when fraud occurs.
This may be a personal thing, but debit cards can make it difficult to keep track of how much money you have to spend. Because you make purchases without getting a running total of how much is left in your account, you must keep track in some way, whether it’s using a checkbook-type ledger or just checking your balance online often. In short, a debit card requires discipline. (In that way, debit cards and credit cards are definitely the same.)
Thank you for reading. Now I’ll go back to stealing candy from babies.
The Jefferson Avenue commercial district in Buffalo, New York, is anchored by a supermarket.
There are dozens of other businesses and services along the 12-block corridor — a couple of bank branches, a library, a coffee shop, gas stations, a small plaza with a dollar store and a primary care clinic and a business incubator for entrepreneurs of color.
But Tops Friendly Markets, the only grocery store on Buffalo’s vast East Side, is the center of activity. More than just a place to buy food, pick up medications and use an ATM, the store is a communal gathering space in a predominantly Black neighborhood that, for generations, has been segregated, isolated and disenfranchised from the wealthier — and whiter — parts of the city.
Which explains how it came to be the site of a mass shooting on a spring day in May of last year. On that Saturday, a gunman, who lived 200 miles away in another part of the state, drove to Jefferson Avenue and went into Tops, and in just a few minutes killed 10 people, injured three and inflicted mass trauma across the community.
It is a scenario that has sadly, and repeatedly, played out in other parts of the country that have experienced mass shootings. But this one came with a twist: The gunman’s intention was to kill as many Black people as possible.
To achieve that, he specifically targeted a ZIP code with one of the highest percentages of Black residents in New York state. All 10 who died that day were Black.
“The mere fact that someone can research, ‘Where will the greatest number of Black people be … on a Saturday morning,’ that’s not by chance,” said Franchelle Parker, a community organizer and executive director of Open Buffalo, a nonprofit focused on racial, economic and ecological justice. “That’s not a mistake. It’s a community that’s been deeply segregated for decades.”
The day of the shooting, Parker, who grew up in nearby Niagara Falls, was driving to Tops, where she planned to buy a donut and an unsweetened iced tea before heading into the Open Buffalo office, which is located a block away from Tops. The mother of two had intended to complete the mundane task of cleaning up her desk — “old coffee cups and stuff” — after a busy week.
She saw the news on Twitter and didn’t know if she should keep driving to Jefferson Avenue or turn around and go back home. She eventually picked the latter.
When she showed up the next day, there were thousands of people grieving in the streets. “The only way that I could explain my feeling, it was almost like watching an old war movie when a bomb had gone off and someone’s in, like, shell shock. That’s how it felt,” said Parker, vividly recounting the community’s collective trauma in a meeting room tucked inside of Open Buffalo’s second-story office on Jefferson Avenue.
Almost immediately following the May 14, 2022, massacre, which was the second-deadliest mass shooting in the United States last year, conversations locally and nationally turned to the harsh realities of the East Side and how long-standing factors that affect the daily life of residents — racism, poverty and inequity — made the community an ideal target for a white supremacist.
Now, more than a year after the tragedy, there is growing concern that not enough is being done fast enough to begin to dismantle those factors. And amid those conversations, there are mounting calls for the banking industry — whose historical policies and practices helped cement the racial segregation and disinvestment that ultimately shaped the East Side — to leverage its collective power and influence to band together in an effort to create systemic change.
The ideas about how banks should support the East Side and better embed themselves in the neighborhood vary by people and organizations. But the basic argument is the same: Banks, in their role as financiers and because of the industry’s history of lending discrimination, are obligated to bring forth economic prosperity in disinvested communities like the East Side.
I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.
Chiwuike Owunwanne, corporate responsibility officer at KeyBank
“Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that,” said The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity, a four-year-old enterprise focused on racial, geographic and economic health disparities. “But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.”
To be sure, banks’ ability to reverse the course of the community isn’t guaranteed — and there is no formula to determine how much accountability they should hold to fix deeply entrenched problems like racism. Several Buffalo-area bankers said that while the Tops shooting heightened the urgency to help the East Side, the industry itself cannot be the sole driver of change.
“There are a lot of institutions … that can certainly play a part in reversing the challenges that we see today,” said Chiwuike “Chi-Chi” Owunwanne, a corporate responsibility officer at KeyBank, the second-largest bank by deposits in Buffalo. “I know banks are often looked upon sort of like a panacea, but I don’t particularly see it that way. I think others have a role to play in all of this.”
A long history of segregation
How the East Side — and the Tops store on Jefferson Avenue — became the destination for a racially motivated mass murderer is a story about racism, segregation and disinvestment.
Even as it bears the nickname “the city of good neighbors,” Buffalo has long been one of the most racially segregated cities in the United States. Of the 114,965 residents who live on the East Side, 59% are Black, according to data from the 2021 U.S. Census American Community Survey. The percentage is even higher in the 14208 ZIP code, where the Tops store is located. In that ZIP code, among 11,029 total residents, nearly 76% are Black, the census data shows.
The city’s path toward racial segregation started in the early 20th century when a small number of job-seeking Black Americans migrated north to Buffalo, a former steel and auto manufacturing hub at the far northwestern end of New York state. Initially, they moved into the same neighborhoods as many of the city’s poorer immigrants and lived just east of what is today the city’s downtown district. As the number of Blacks arriving in Buffalo swelled in the 1940s, they were increasingly confronted with various housing challenges, including racist zoning laws and restrictive deed covenants that kept them from buying homes in more affluent white areas.
Black Buffalonians also faced housing discrimination in the form of redlining, the practice of restricting the flow of capital into minority communities. In 1933, as the Great Depression roiled the economy, a temporary federal agency known as the Home Owners’ Loan Corporation used government bonds to buy out and refinance mortgages of properties that were facing or already in foreclosure. The point was to try to stabilize the nation’s real estate market.
As part of its program, HOLC created maps of American cities, including Buffalo, that used a color coding scheme — green, blue, yellow and red — to convey the perceived riskiness of making loans in certain neighborhoods. Green was considered minimally risky; other areas that were largely populated by immigrant, Black or Latino residents were labeled red and thus determined to be “hazardous.”
“The goal was to free up mortgage capital by going to cities and giving banks a way to unload mortgages, so they could turn around and make more mortgage loans,” said Jason Richardson, senior director of research at the National Community Reinvestment Coalition, an association of more than 750 community-based organizations that advocates for fair lending. “It was kind of a radical concept and it has evolved over the decades into our modern mortgage finance system.”
The Federal Housing Administration, which was established as a permanent agency in 1934, used similar methods to map urban areas and labeled neighborhoods from “A” to “D,” with “A” considered to be the most financially stable and “D” considered the least. Neighborhoods that were largely Black, even relatively stable ones, were put in the “D” category.
The result was that banks, which wanted to be able to sell mortgage loans to the FHA, were largely dissuaded from making loans in “risky” areas. And Buffalo’s East Side, where the majority of Blacks were settling, was deemed risky. Unable to get loans, Blacks couldn’t buy homes, start businesses or build equity. At the same time, large industrial factories on the East Side were closing or moving away, limiting job opportunities and contributing to rising poverty levels.
“Today what we’re left with is the residue of this process where we’ve enshrined … a pattern of economic segregation that favors neighborhoods that had fewer Black people in them and generally ignores neighborhoods that had African Americans living in them,” Richardson said.
Case in point: Research by the National Community Reinvestment Coalition shows that three-quarters of neighborhoods that were once redlined are low- to moderate-income neighborhoods today, and two-thirds of them are majority minority communities.
Adding to the division between Blacks and whites in Buffalo was the construction of a highway called the Kensington Expressway. Built during the 1960s, the below-grade, limited-access highway proved to be a speedy way for suburban workers to get to their downtown jobs. But its construction cut off the already-segregated East Side even more from other parts of the city, displacing residents, devaluing houses and destroying neighborhoods and small businesses.
As a result of those factors and more, many Black residents have become “trapped” on the East Side, according to Dr. Henry Louis Taylor Jr., a professor of urban and regional planning at the University at Buffalo. In 1987, Taylor founded the UB Center for Urban Studies, a research, neighborhood planning and community development institute that works on eliminating inequality in cities and metropolitan regions. In September 2021, eight months before the Tops shooting, the Center for Urban Studies published a report that compared the state of Black Buffalo in 1990 to present-day conditions. The conclusion: Nothing had changed for Blacks over 31 years.
As of 2019, the Black unemployment rate was 11%, the average household income was $42,000 and about 35% of Blacks had incomes that fell below the poverty line, the report said. It also noted that just 32% of Blacks own their homes and that most Blacks in the area live on the East Side.
“Those figures remain virtually unchanged while the actual, physical conditions that existed inside of the community worsened,” Taylor told American Banker in an interview in his sun-filled office at the center, located on the University at Buffalo’s city campus. “When we looked upstream to see what was causing it, it was clear: It was systemic, structural racism.”
Banks’ moral obligations
As the East Side struggled over the decades with rampant poverty, dilapidated housing, vacant lots and disintegrating infrastructure, banks kept a physical presence in the community, albeit a shrinking one. In mid-2000, there were at least 20 bank branches scattered across the East Side, but by mid-2022, the number had fallen to around 14, according to the Federal Deposit Insurance Corp.’s deposit market share data. The 14 include four new branches that have opened since early 2019 — Northwest Bank, KeyBank, Evans Bank and BankOnBuffalo.
The first two branches, operated by Northwest in Columbus, Ohio, and KeyBank, the banking subsidiary of KeyCorp in Cleveland, were requirements of community benefits agreements negotiated between each bank and the National Community Reinvestment Coalition. In both cases, Northwest and KeyBank agreed to open an office in an underserved community.
Evans Bank opened its first East Side branch in the fall of 2021. The office is located in the basement of an $84 million affordable senior housing building that was financed by Evans, a $2.1 billion-asset community bank headquartered south of Buffalo in Angola, New York.
Banks have been very good at providing charitable contributions to the Black community. They get an ‘A’ for that. But doing the things that banks can do in terms of being a catalyst for revitalization and investment in this community, they have not done that.
The Rev. George Nicholas, an East Side pastor who is also CEO of the Buffalo Center for Health Equity
On the community and economic development front, banks have had varying levels of participation. Buffalo-based M&T Bank, which holds a whopping 64% of all deposits in the Buffalo market and is one of the largest private employers in the region, has made consistent investments in the East Side by supporting Westminster Community Charter School, a kindergarten through eighth-grade school, and the Buffalo Promise Neighborhood, a nonprofit organization focused on improving access to education in the city’s 14215 ZIP code.
Currently, Buffalo Promise Neighborhood operates four schools. In addition to Westminster, it runs Highgate Heights Elementary, also K-8, as well as two academies that serve children ages six weeks through pre-kindergarten. Twelve M&T employees are dedicated to the program, according to the Buffalo Promise Neighborhood website. The bank has invested $31.5 million into the program since its 2010 launch, a spokesperson said.
Other banks are making contributions in other ways. In addition to the Jefferson Avenue branch and as part of its community benefits plan, Northwest Bank, a $14.2 billion-asset bank, supports a financial education center through a partnership with Belmont Housing Resources of Western New York. Meanwhile, the $198 billion-asset KeyBank gave $30 million for bridge and construction financing for Northland Workforce Training Center, a $100 million redevelopment project at a former manufacturing complex on the East Side that was partially funded by the state.
BankOnBuffalo’s East Side branch is located inside the center, which offers KeyBank training in advanced manufacturing and clean energy technology careers. A subsidiary of $5.6 billion-asset CNB Financial in Clearfield, Pennsylvania, BankOnBuffalo’s office opened a month after the shooting. The timing was coincidental, but important, said Michael Noah, president of BankOnBuffalo.
“I think it just cemented the point that this is a place we need to be, to be able to be part of these communities and this community specifically, and be able to build this community up,” Noah said.
In terms of public-private collaboration, some banks have been involved in a deeper way. In 2019, New York state, which had already been pouring $1 billion into Buffalo to help revitalize the economy, announced a $65 million economic development fund for the East Side. The initiative is focused on stabilizing neighborhoods, increasing homeownership, redeveloping commercial corridors including Jefferson Avenue, improving historical assets, expanding workforce training and development and supporting small businesses and entrepreneurship.
In conjunction with the funding, a public-private partnership called East Side Avenues was created to provide capital and organizational support to the projects happening along four East Side commercial corridors. Six banks — Charlotte, North Carolina-based Bank of America, the second-largest bank in the nation with $2.5 trillion of assets; M&T, which has $203 billion of assets; KeyBank; Warsaw, New York-based Five Star Bank, which has about $6 billion of assets; Northwest and Evans — are among the 14 private and philanthropic organizations that pledged a combined $8.4 million to pay for five years’ worth of operational support, governance and finance, fundraising and technical assistance to support the nonprofits doing the work.
Laura Quebral, director of the University at Buffalo Regional Institute, which is managing East Side Avenues, said the banks were the first corporations to step up to the request for help, and since then have provided loans and other products and education to keep the program moving.
Their participation “is a signal to the community that banks cared and were invested and were willing to collaborate around something,” Quebral said. “Being at the table was so meaningful.”
Richard Hamister is Northwest’s New York regional president and former co-chair of East Side Avenues. Hamister, who is based in Buffalo, said banks are a “community asset” that have a responsibility to lift up all communities, including those where conditions have arisen that allow it to be a target of racism like the East Side.
“We operate under federal charters, so we have an obligation to the community to not only provide products and services they need but also support when you go through a tragedy like that,” Hamister said. “We also have a moral obligation to try to help when things are broken … and to do what we can. We can’t fix everything, but we’ve got to fix our piece and try to help where we can.”
In the wake of a tragedy
After the massacre, there was a flurry of activity within banks and other organizations, local and out-of-town, to respond to the immediate needs of East Side residents. With the community’s only supermarket closed indefinitely, much of the response centered around food collection and distribution. Three of M&T’s five East Side branches, including the Jefferson Avenue branch across the street from Tops, became food distribution sites for weeks after the shooting. On two consecutive Fridays, Northwest provided around 200 free lunches to the community, using a neighborhood caterer who is also the bank’s customer. And BankOnBuffalo collected employee donations that amounted to more than 20 boxes of toiletries and other items that were distributed to a nonprofit.
At the same time, M&T, KeyBank and other banks began financial donations to organizations that could support the immediate needs of the community. KeyBank provided a van that delivered food and took people to nearby grocery stores. Providence, Rhode Island-based Citizens Financial Group, whose ATM inside Tops was inaccessible during the store’s temporary closure, installed a fee-free ATM near a community center located about a half-mile north of Tops, and later put a permanent ATM inside the center that remains there today. And M&T rolled out a short-term loan program to provide capital to East Side small-business owners.
One of the funds that benefited from banks’ support was the Buffalo Together Community Response Fund, which has raised $6.2 million to address the long-term needs of the East Side.
Bank of America and Evans Bank each donated $100,000 to the fund, whose list of major sponsors includes four other banks — JPMorgan Chase, Citigroup, M&T and KeyBank. Thomas Beauford Jr., a former banker who is co-chair of the response fund, said banks, by and large, directed their resources into organizations where the dollars would have an immediate impact.
“Banks said, ‘Hey, you know … it doesn’t make sense for us to try to build something right now. … We will fund you in the work you’re doing,'” said Beauford, who has been president and CEO of the Buffalo Urban League since the fall of 2020. “I would say banks showed up in a big way.”
Fourteen months later, banks say they are committed to playing a positive role on the East Side. For the second year, KeyBank is sponsoring a farmers’ market on the East Side, an attempt to help fill the food desert in the community. Last fall, BankOnBuffalo launched a mobile “bank on wheels” truck that’s stationed on the East Side every Wednesday. The 34-foot-long truck, which is staffed by two people and includes an ATM and a printer to make debit cards, was in the works before the shooting, and will eventually make four stops per week around the Buffalo area.
Evans has partnered with the city of Buffalo to construct seven market-rate single family homes on vacant lots on the East Side. The relationship with the city is an example of how banks can pair up with other entities to create something meaningful and lasting, more than they might be able to do on their own, said Evans President and CEO David Nasca.
The bank has “picked areas” where it can use its resources to make a difference, Nasca said.
“I don’t think the root causes can be ameliorated” by banks alone, he said. “We can’t just grant money. It has to be within our construct of a financial institution that invests and supports the public-private partnership. … All the oars [need to be] pulling together or this doesn’t work.”
‘Little or no engagement with minorities’
All of these efforts are, of course, welcomed by the community, but there is still criticism that banks haven’t done enough to make up for their past contributions to segregating the city. And perhaps more importantly, some of that criticism centers on banks failing to do their most basic function in society — provide credit.
In 2021, the New York State Department of Financial Services issued a report about redlining in Buffalo. The regulator looked at banks and nonbank lenders and found that loans made to minorities in the Buffalo metro area made up 9.74% of total loans in Buffalo. Overall, Black residents comprise about 33% of Buffalo’s total population of more than 276,000, census data shows.
The department said its investigation showed the lower percentage was not due to “excessive denials of loan applications based on race or ethnicity,” but rather that “these companies had little or no engagement with minorities and generally made scant effort to do so.”
“The unsurprising result of this has been that few minority customers or individuals seeking homes in majority-minority neighborhoods have made loan applications … in the first instance.”
Furthermore, accusations of redlining persist today, even though the practice of discriminating in housing based on race was outlawed by the Fair Housing Act of 1968.
In 2014, Evans was accused of redlining by the New York State Attorney General, which said the community bank was specifically avoiding making mortgage loans on the East Side. The bank, which at the time had $874 million of assets, agreed to pay $825,000 to settle the case, but Nasca maintains that the charges were unfounded. He points to the fact that the bank never had a fair lending or fair housing violation, no specific incidents were ever claimed and that the bank’s Community Reinvestment Act exam never found evidence of discriminatory or illegal credit practices.
The bank has a greater presence on the East Side today, but that’s because it has grown in size, not because it is trying to make up for previous accusations of redlining, he said.
“Ten years ago, our involvement [on the East Side] certainly wasn’t what you’re seeing today,” Nasca said. “We were looking to participate more, but we were participating within our means and our reach. As we have grown, we have built more resources to be able to do more.”
Shortly after accusations were made against Evans, Five Star Bank, the banking arm of Financial Institutions in Warsaw, New York, was also accused of redlining by the state Attorney General. Five Star, which has been growing its presence in the Buffalo market for several years, wound up settling the charges for $900,000 and agreeing to open two branches in the city of Rochester.
KeyBank is currently being accused of redlining by the National Community Reinvestment Coalition. In a 2022 report, the group said that KeyBank is engaging in systemic redlining by making very few home purchase loans in certain neighborhoods where the majority of residents are Black. Buffalo is one of several cities where the bank’s mortgage lending “effectively wall[ed] out Black neighborhoods,” especially parts of the East Side, the report said.
KeyBank denied the allegations. In March, the coalition asked regulators to investigate the bank’s mortgage lending practices.
Beyond providing more credit, some community members believe that banks should be playing a larger role in addressing other needs on the East Side. And the list of needs runs the gamut from more grocery stores to safe, affordable housing to infrastructure improvements such as street and sidewalk repairs.
Alexander Wright is founder of the African Heritage Food Co-op, an initiative launched in 2016 to address the dearth of grocery store options on the East Side, where he grew up. Wright said that while banks’ philanthropic efforts are important, banks in general “need to be in a place of remediation” to fix underlying issues that the industry, as a whole, helped create. (After publication of this story, Wright left his job as CEO of the African Heritage Food Co-Op.)
Aside from charitable donations, banks should be finding more ways to work directly with East Side business owners and entrepreneurs, helping them with capital-building support along the way, Wright said. One place to start would be technical assistance by way of bank volunteers.
“Banks are always looking to volunteer. ‘Hey, want to come out and paint a fence? Want to come out and do a garden?'” Wright said. “No. Come out here and help Keshia with bookkeeping. Come out here and do QuickBooks classes for folks. Bring out tax experts. Because these are things that befuddle a lot of small businesses. Who is your marketing person? Bring that person out here. Because those are the things that are going to build the business to self-sufficiency.
“Anything short of the capacity-building … that will allow folks to rise to the occasion and be self-sufficient I think is almost a waste,” Wright added. “We don’t need them to lead the plan. What we need them to do is be in the community and [be] hearing the plan and supporting it.”
Parker, of Open Buffalo, has similar thoughts about the role that banks should play. One day, soon after the massacre, an ATM appeared down the street from Tops, next to the library that sits across the street from Parker’s office. Soon after the ATM was installed, Parker began fielding questions from area residents who were skeptical of the machine and wanted to know if it was legitimate. But Parker didn’t have any information to share with them. “There was no outreach. There was no community engagement. So I’m like, ‘Let me investigate,'” she said. “I think that’s a symptom of how investment is done in Black communities, even though it may be well-intentioned.”
As it turns out, the temporary ATM belonged to JPMorgan Chase. The megabank has had a commercial banking presence in Buffalo for years, but it didn’t operate a retail branch in the region until last year. Today it has four branches in operation and plans to open another two by the end of the year, a spokesperson said.
After the Tops shooting, the governor’s office reached out to Chase asking if the bank could help in some way, the spokesperson said in response to the skepticism. The spokesperson said that while the Chase retail brand is new to the Buffalo region, the company has been active in the market for decades by way of commercial banking, private banking, credit card lending, home lending and other businesses.
In addition to the ATM, the bank provided funding to local organizations including FeedMore Western New York, which distributes food throughout the region.
“We are committed to continuing our support for Buffalo and helping the community increase access to opportunities that build wealth and economic empowerment,” the spokesperson said in an email.
In the year since the massacre, there has been some progress by banks in terms of their interest in listening to the East Side community and learning about its needs, said Nicholas. But he hasn’t felt an air of urgency from the banking community to tackle the issues right now.
“I do experience banks being a little more open to figuring out what their role is, but it’s slow. It’s slow,” said Nicholas. The senior pastor of the Lincoln Memorial United Methodist Church, located about a mile north from Tops, Nicholas is part of a 13-member local advisory committee for the New York arm of Local Initiatives Support Coalition, or LISC. The group is focused on mobilizing resources, including banks, to address affordable housing in Western New York, specifically in the inner city, as well as training minority developers and connecting them to potential investors, Nicholas said.
Of the 13 members, seven are from banks — one each from M&T, Bank of America, BankOnBuffalo, Evans and KeyBank, and two members from Citizens Financial Group. One of the priorities of LISC NY is health equity, and the fact that banks are becoming more engaged in looking at health disparities is promising, Nicholas said. Still, they have more work to do, he said.
“I need them to think more on how to strengthen and build the economy on the East Side and provide leadership around that, not only to provide charitable things, but using sound business and banking and community development principles to say, ‘OK, if we’re going to invest in this community, these are the types of things that need to happen in this community,’ and then encourage their partners and other people they work with … to come fully in on the East Side.”
Some bankers agree with the community activists.
“Putting a branch in is great. Having a bank on wheels is great,” said Noah of BankOnBuffalo. “But if you’re not embedded in the community, listening to the community and trying to improve it, you’re not creating that wealth and creating a better lifestyle for everyone.”
What could make a substantial difference in terms of banks’ impact on the community is a combination of collaboration and leadership, said Taylor. He supports the idea of banks leading the charge on the creation of a comprehensive redevelopment and reinvestment plan for the East Side, and then investing accordingly and collaboratively through their charitable foundations.
“All of them have these foundations,” Taylor said. “You can either spend that money in a strategic and intentional way designed to develop a community for the existing population, or you can spend that money alone in piecemeal, siloed, sectorial fashion that will look good on an annual report, but won’t generate transformational and generational changes inside a community.”
Banks might be incentivized to work together because it could mean two things for them, according to Taylor: First, they’d have an opportunity to spend money in a way that would have maximum impact on the East Side, and second, if done right, the city and the banks could become a model of the way to create high levels of diversity, equity and inclusion in an urban area.
“If you prove how to do that, all that does is open up other markets of consumption all over the country because people want to figure out how to do that same thing,” Taylor said.
Some of that is already happening, at least on a bank-by-bank case, said KeyBank’s Owunwanne. Through the KeyBank Foundation, the company is able to leverage different relationships that connect nonprofits to other entities and corporations that can provide help.
“I see this as an opportunity for us to make not just incremental changes, but monumental changes … as part of a larger group,” Owunwanne said “Again, I say that not to absolve the bank of any responsibility, but just as a larger group.”
Downstairs from Parker’s office, Golden Cup Coffee, a roastery and cafe run by a husband and wife team, and some other Jefferson Avenue businesses are trying to build up a business association for existing and potential Jefferson-area businesses. Parker imagined what the group could accomplish if one of the banks could provide someone on a part-time basis to facilitate conversations, provide administrative support and coordinate marketing efforts.
“In the grand scheme of things, when we’re talking about a multimillion dollar [bank], a part-time employee specifically dedicated to relationship-building and building out coalitions, it sounds like a small thing,” Parker said. “But that’s transformational.”
Whether you found a billing error on your credit card statement, suspect a fraudulent charge or simply aren’t satisfied with a product you purchased, the Fair Credit Billing Act of 1974 (FCBA) gives cardholders recourse to dispute charges and get their money back. But that grace period comes with a time limit, as disputes must be submitted in writing no later than 60 days after your credit card statement is issued.
Here’s what you need to know about the FCBA, including credit card dispute time limits, valid reasons for filing a dispute and how long credit card disputes take once they are filed.
Understand your legal rights
The ability to dispute false charges isn’t just a courtesy extended by credit card issuers; it’s a legal right protected by the FCBA. In accordance with that federal law, you have 60 days from the date your credit card statement is issued to dispute a billing error. To comply with this policy, your dispute must be submitted in writing.
🤓Nerdy Tip
The legal minimum time frame for filing a dispute is 60 days, but some credit card processors allow for a longer window. For example, Visa, Mastercard and American Express each allow chargeback requests up to 120 days from the date of the transaction in certain cases. If it’s been longer than 60 days, check with your issuer directly to determine whether you can still file a dispute.
Once you’ve filed your dispute, the FCBA provides that the credit card issuer must acknowledge receipt of your dispute and launch an investigation within 30 days. From there, it has 90 days to either resolve the dispute with a credit to your account or provide a written explanation of why the charges stand.
Before you dispute a credit card charge
Although all cardholders have the legal right to dispute unfair credit card charges, the process can be complicated, so it’s best to make sure your dispute is valid before filing it.
🤓Nerdy Tip
Disputes can’t be filed on pending charges, so if you see a suspicious transaction, you’ll have to wait until it has fully processed. Note that pending transactions can sometimes be caused by credit card holds, meaning they don’t match the final amount that will be charged.
To save yourself from unnecessary paperwork, take these steps before you follow through with initiating a dispute:
Run a search on the name of the company. Some companies operate under multiple names, using one name for customer-facing purposes and a different one for operations and logistics. If you see a transaction from a company name you don’t recognize, a quick online search may help you realize what the charge is.
Check your email, past statements and other payment records. Do you have a free trial or subscription that you forgot to cancel? Or do you have recurring but infrequent charges, like an annual bill? If you take a few minutes to check through your email for order confirmations and review past credit card statements, that will help ensure this isn’t a charge you simply forgot about.
Talk to authorized users to see if they recognize the charge. If your spouse, child, employee or anyone else is an authorized user on your credit card or has access to use the card, they may be the source of the unrecognized transaction.
Contact the merchant directly. If you’re certain there was a billing error — or alternatively, if you’re simply not satisfied with a product you purchased — contact the merchant directly. Explain the issue with the transaction and request a chargeback. If the chargeback is approved, the transaction will be reversed and funds will be returned. And even if the merchant is uncooperative, that documentation will help speed up the investigation once your dispute is filed.
Put your dispute in writing
Although it may make sense to initiate a credit card dispute online or by phone, full compliance with the FCBA requires that you follow up that initial contact in writing within that 60-day window. This ensures that both you and your credit card issuer have record of the dispute and that an investigation can be conducted with accurate information.
🤓Nerdy Tip
Many major issuers offer options to dispute a charge in writing from your online account. Simply go to your account activity, select the charge in question and look for a link that says “report a problem,” “dispute charge” or similar. Then follow the prompts to complete your written dispute.
Your written dispute should include your name and account number, the date you’re filing the dispute, the date of the transaction in question and an explanation of why you’re disputing the transaction. If you’re dissatisfied with the quality of a product and have already reached out to the merchant, include that information as well. And make sure to include copies of any supporting documentation.
It can be tough to get a good handle on your finances, especially when you’re first starting out in your career or just don’t have a lot of cash to spare. Throw in student loan debt, a worldwide pandemic, and growing economic uncertainty, and it can seem especially daunting to get your financial situation on the right track.
Luckily, there are a few bad money habits that you can break that will make getting your finances in order easier. While there are many aspects of your financial situation that you can’t control, getting rid of bad money habits and forming new, responsible habits when it comes to spending and borrowing can set you up for success.
What’s Ahead:
1. Spending More than You Earn
How much you spend vs. how much you earn is one of the key factors that can make or break your financial health. You should always aim to spend less than you make each month, with the goal of saving 20% of your income each month.
While this sounds simple enough, life can get in the way sometimes, whether you have a couple of unexpected expenses that tank your budget, you lose a source of income, or you just don’t quite make enough to meet your basic needs each month. Even if you find yourself unable to spend less than you make right now, earning more money than you spend should always be your ultimate goal when it comes to setting your finances in order.
2. Living above Your Means
Living above your means can put a serious dent in your finances if you aren’t careful. While you probably don’t need to be frugal to the extreme, you should steer clear of expensive and unnecessary purchases like new cars, luxury apartments, and fancy vacations if you’re still trying to get your financial footing. This doesn’t mean you can’t treat yourself every once in a while, but it does mean you should make it work within your budget.
3. Not Sticking to a Budget
How do you know how much you can spend each month while still living within your means? The easiest way to do so is to make (and stick to) a budget.
You should include necessities like housing, utilities, groceries, and insurance, and may want to add categories for saving and discretionary “fun” spending each month if your budget allows.
Not sure where to start? Budgeting software like PocketSmith makes budgeting easy and painless.
4. Not Tracking Spending
After you set a budget, the next step is to track your spending each month to make sure that you’re sticking to it. Tracking spending can help you to make sure that you’re not going over budget in any one area. It also helps you to keep track of your finances and get a clear-eyed view of what you spend your hard-earned money on.
5. Not Educating Yourself about Personal Finance
The world of personal finance can be full of jargon and terms that are confusing for beginners. I had never studied business or accounting and found many financial terms frustratingly opaque when I first started to learn more about personal finance.
Unfortunately, poor financial literacy can have negative consequences when it comes to your financial wellbeing. Knowing enough about personal finance to make responsible and educated decisions when it comes to money is really important. Luckily, there are plenty of free resources online (including the articles here at Money Under 30!) to get you started.
6. Not Building up an Emergency Fund
A sizable safety net is another cornerstone of good financial health. After you’ve set a budget and begun to track your spending each month, you should start to put money away each month towards an emergency fund.
Most financial experts recommend that you save between three and six months worth of expenses in an emergency fund. If you’re not sure exactly how much to save, you can use MU30’s emergency fund calculator to figure it out.
7. Not Saving for Retirement
Once you’ve established a budget and stashed away some money for an emergency fund, the next step on your path to financial wellness should be to start saving for retirement. This is especially important if your employer matches retirement contributions since you’re basically leaving free money on the table if you don’t contribute up to their match limit.
If your employer doesn’t offer any retirement savings options, you can contribute to a traditional or Roth IRA (the contribution limit is $6,000 in 2020.) Once you’ve maxed out your retirement contributions for the year, you can save or invest any additional cash that’s leftover.
If you’re not sure how much you should be saving, MU30’s investment calculator can help you plan your savings goals. If you need help with the ins and outs of investing for retirement and beyond, investing services like blooom (which helps you manage your IRA or 401(k)) and Public investment app make investing accessible even for beginners.
8. Not Paying off Your Credit Card Balance in Full Each Month
I’ve certainly been there – when you’re not making enough to make ends meet and need to pay your bills each month, it can be tempting to put extra expenses on a credit card.
While credit cards provide welcome flexibility and rewards redemption opportunities, they can quickly turn into a major debt burden if you’re not careful. If it’s at all within your means, you should try to pay off your balance in full each month to avoid accumulating interest and building up debt.
9. Making Late Payments
Late payments are another common financial mistake when you’re new to personal finance. Unfortunately, they can have lasting consequences when it comes to your credit score and your wallet.
Late payments on bills often come with additional late fees and interest, and a history of late or missed payments can lower your credit score. If it’s your first time making a late payment, you should contact your creditor to see if they can forgive a one-time late payment.
10. Not Investigating All Your Options when it Comes to Financial Products
It can be easy to go with the path of least resistance when it comes to personal finance products like bank accounts, credit cards, and loans. Whether you get a recommendation from a family member or friend, get a flyer in the mail, or see an ad online, you may be tempted to go with the first available option.
Resist that temptation – you should always compare different financial products in order to ensure you’re getting the best deal possible.
11. Spending Too Much on Groceries
Groceries are definitely one of the biggest weaknesses in my budget! It’s so easy to spend more than you mean to at the grocery store, especially if you love to cook and eat delicious food.
If cooking at home and eating well is important to you, it’s okay to budget a little extra in the grocery department. But you should try your best to reign it in and stick to a reasonable monthly goal when possible. I’ve found it also helps to plan meals in advance, shop at bulk stores like Costco, and invest in shelf-stable staples like rice and lentils to stretch my budget even further.
12. Buying Everything New
If you’re trying to save money and get your finances under control, buying everything new can siphon off hundreds of dollars in savings each year. No matter what you’re looking to buy, from cars to clothing and everything in between, there are probably cheaper gently used options.
I love trawling Craigslist, yard sales, and thrift stores for hidden gems! While you probably won’t be able to find absolutely everything you need, it’s still a good idea to check out your options before you buy any brand new items at the sticker price.
13. Not Investing in Insurance
When your budget is already tight, it can be tempting to forgo insurance in favor of making ends meet. But going without insurance can put you in an even worse financial situation when you need help the most.
If you’re able to, you should invest in insurance including health insurance, home or renters insurance, and auto insurance to make sure that you’re covered in the event of an emergency. Insurance marketplaces like Policygenius can help you to find an affordable insurance policy that works for you.
14. Ignoring Your Student Loans
Like many Millennials, I have a pretty sizable student loan burden racked up over the course of undergrad and graduate school. Making student loan payments on time each month can be a major strain on your budget, but failing to pay off your loans can have even worse consequences.
Luckily, there are some options to make paying down your loans more bearable. When it comes to federal student loans, you may be eligible for an income-based repayment plan that could drastically reduce your monthly payment. And for private student loans, you may qualify to refinance your loans at a lower rate and save on interest.
15. Spending More than You have to on Phone Plans
Phone plans are another common monthly expense that can add up fast if you’re not careful. When purchasing a phone plan, you should think about what services and data you really need before automatically selecting an expensive plan.
It can be helpful to look back at old billing statements and see how much data you really used each month. You may also want to consider getting on a family plan with family members, friends, or roommates to save money each month.
16. Not Shopping around for Auto Insurance
If you haven’t changed your auto insurance policy in a while, there’s a good chance that you could be saving money each month if you make a switch. That might sound like an auto insurance sales pitch, but it’s true!
Your rates are likely to be lower after you switch if it’s been a long time since you’ve been in an accident, or just because you’ve gotten older and are viewed as a less risky driver by insurance companies. Some car insurance companies, like Metromile, charge you based on how many miles you drive each month, which can be a boon if you’re mostly working from home.
If you’re happy with your insurance provider and don’t want to make a switch, ask them if they can reevaluate your monthly rate or match quotes from the competition.
17. Subscription Bloat
Subscription services have proliferated in recent years, from popular software like Adobe Creative Cloud to monthly subscriptions for everything from TV channels to cute underwear. While it’s easy to sign up for a subscription and forget about it, especially if it only costs a few dollars a month, they can really add up over time.
One way to cut down on subscriptions is to survey your bank statement at the end of each month and evaluate which subscription charges are truly worth it.
If you don’t want to take the time to do this yourself, you can set up an account with Trim, a service dedicated to helping you clear out your unused subscriptions. They’ll even negotiate your bills for you on your behalf!
18. Lifestyle Inflation
Whether you just got a pay raise or started a lucrative side hustle, it can feel incredibly freeing to have a little extra cash left over at the end of each month. While it’s tempting to treat yourself and celebrate your new success, you shouldn’t let lifestyle inflation eat into your budget. By living within your means and socking away any additional money you earn into savings and investments, you can set yourself up for a bright financial future.
19. Not Having a Career Plan
While reducing your expenses, saving, and investing are all good strategies toward sound financial health, one of the most effective ways to jumpstart your finances is to earn more money. This isn’t always as difficult as it sounds!
By planning out your career path, you can work toward earning more in the future. If you think you’re not being compensated enough at your current job, you might want to consider asking for a raise or applying to better-compensated positions at other companies.
20. Not Setting Financial Goals
Earning, budgeting, and saving money is a lot easier to do if you have concrete goals in mind. Whether your goal is to be debt-free, save up for a major expense like a new car or a wedding ring, buy a house, or even retire early, setting financial goals can motivate you to break bad money habits and create new, healthy habits that help you achieve your dreams.
Personally, I’m saving up for a little house in the countryside with a big vegetable garden and a little chicken coop.
21. Not Setting Personal Goals
Financial goals are usually pretty tightly interwoven with personal goals. Maybe your personal goal is to work part-time and spend more time with family, or maybe you dream of saving up money to travel the world.
Maybe you’re happy making less money at a job that you believe in and that makes the world a better place, or maybe you prefer a low-stress job with decent pay that allows you to devote time to creative projects. It’s a good idea to get a firm sense of your personal goals so that you can then use them to inform your professional and financial goals.
Personal finance doesn’t take place in a vacuum, and there are plenty of factors outside our control when it comes to making and saving money. If there’s a cause you care about that has an impact on personal finance, like equitable worker compensation, universal healthcare, predatory lending, or other issues, you should consider getting involved.
While one person might not be able to change these big issues alone, many people working together can have a positive impact that stretches far beyond your own bank account.
Summary
The flip side to breaking bad habits when it comes to money is forming better ones in their place. This can be especially hard if you’re struggling financially, but every little step you take in the present will pay off dividends in the future.
90 percent of the real estate professionals reading this report will understand that the leveraging of property technology (PropTech) to research, buy, sell and manage real estate, is the future. This report is to help the other 10 percent and to validate what most industry professionals already know.
The PropTech 101
Before diving into the deep end of PropTech investing, it’s important
to define what this new wave of PropTech incorporates. Advancements in the way
real estate professionals process data are not new, you see. However, the
breaking technologies that have powered up almost all business are set to take off toward a new paradigm. Artificial
intelligence (AI), Big Data analytics, Virtual Reality, and Augmented Reality, and more advanced forms of computer-aided
design (CAD) are the main areas of the innovative shift. 20 years ago such
technologies were considered science fiction, but today PropTech startups are
addressing everything from fixing a tenant’s leaking faucet to industry
insights and more. Make no mistake, PropTech is not only here, but it’s also
becoming as indispensable as the telephone. If you are among the 10 percent, who think your real estate related
business can operate without these new technologies, imagine running your store
with no phone.
PropTech Investment Barometer
The latest Global PropTech Confidence Index published by New York VC
firm MetaProp reveals the robustness of the investor segment. The report also
frames the overall maturity of the startup ecosystem from data gleaned from
over 500 investors across 1,600 startups. The twice-per-year index also shows
that 60% of PropTech investors surveyed plan to invest even more in 2019. With
2018 seeing the most investment ever, this vote of confidence is a significant
litmus test. Even with a mixed bag of geo-policy and economic factors weighing
on investors, confidence in the segment still runs very high. There are several
reasons for this including the quality of investment pitches VC receive. The
“maturity” of innovation is reflective of the overall quality advancements
innovators are creating. Take so-called “smart buildings,” as a for instance.
In a report for Forbes, real estate innovator, and entrepreneur,
Angelica Krystle Donati predicted coming investments in segments aligned with
“direct synergies on the concept of “smart cities,” such as AI, IoT, cybersecurity, mobility, and e-commerce.” Her
prediction is in line with the more than one-third of major investors who feel
smart building tech will take off. The PropTech innovations are like a snowball
set to roll over and snatch up anything in their path. The investment landscape
mirrors what happened in the mid-2000s with internet technologies and phones.
Maturing Globally
Then there is the revelation that PropTech sector is maturing. This
is best illustrated by the fact there is a sharp division in winners and losers
in the space. Just as was the case in the Web 2.0 era, the cream of innovation
and value is rising to the top, while the rest end up in what became known as
“the dead pool” of technology startups. The best become profitable, and the
useless, underfunded, or ill-planned startups end up bankrupt. In such a
metamorphosis we can expect these big winners to make the next logical step –
to become international companies.
News from Italian proptech startup Casavo is a subtle indicator that
PropTech winners will scale globally. The with the goal of decreasing the time
it takes to sell a property just snagged a €7 million Series A round from
Berlin-based Project A Ventures, Picus Capital, 360 Capital Partners, Kervis
Asset Management, Boost Heroes, alongside Marco Pescarmona and Rancilio Cube.
At its core, Casava creates a simplified transaction process leveraging the Instant Buyer
(iBuyer) model in combination with an s automated valuation engine. The
valuation/offer process is greatly streamlined, with the seller receiving a
full cash payment with a month. Casavo’s
automated valuation engine factors in 70 plus variables to provide the seller
with a fair market value for their property – and a buy offer is presented.
There are many other examples.
Now, let’s say the
Casavo model takes off across Europe. This will create a lot of competition,
and things like the negative aspects of the iBuyer model will squeeze Casava
and other early adopters. What will fill the value void? This is the big
question. You see, the downside of iBuyer models are the losses suffered
on account of commissions and discounts built in. The quick and easy sale is at
the expense of the seller and not the agents or intermediaries. Here’s where
the competition comes in, a competition that will be won by big players like
Zillow and the other U.S. players. The end of the story will be innovators like
Casavo innovating and finding an exit runway with a huge profit, or failing to
innovate and going bankrupt.
Invest in Collaboration
Modernizing the transaction process technologies like AI, AR, CAD,
and VR are allowing potential buyers to visualize without even visiting the
property. The homebuyer can even us CAD and VR alongside Big Data analytics to
check demographics, tax incentives, neighborhood statistics, and local
amenities without ever leaving their reclining living room chair. Agents can
use intelligent machines and big data to streamline
much of the traditional transaction process further, and even match
investors to a property type, etc. The list of potential PropTech uses is as
long as the list of tasks agents, buyers, and sellers have in front of them. At
the end of the day, PropTech relieves many pain points encountered by both real
estate professionals and potential buyers – and investors know this. That’s why
the investing trend is the barometer for PropTech adaptors.
Finally, this report from KPMG in 2017
reveals how real estate professionals can integrate PropTech and bride the gap
between the “built” and the digital environment. The research confirms that Big
Data and analytics will reap the biggest rewards for adopters, but the IoT that
will power smart buildings comes in second, followed by AI innovations. Those
surveyed also validate that streamlined process and improved decision making
are at the top of the list of benefits real estate businesses will receive from
these innovative technologies. What most striking about this 2017 study is the
fact that collaborative PropTech ventures are the key to success in adaptation.
What this means is, “build your own” solutions will no longer work, not even
for the huge players like Zillow. In the end, a collaboration between real
estate and technology players will be the future. Almost half of the leading
real estate decision makers surveyed by said they would collaborate with a new
or existing supplier of PropTech.
Phil Butler is a former engineer, contractor, and telecommunications professional who is editor of several influential online media outlets including part owner of Pamil Visions with wife Mihaela. Phil began his digital ramblings via several of the world’s most noted tech blogs, at the advent of blogging as a form of journalistic license. Phil is currently top interviewer, and journalist at Realty Biz News.
In today’s episode of “Saving and Investing”, Michael Fischer explains a concept I’ve heard mentioned a lot, but have never understood. The term “leverage” is used in many financial books and articles, often referring to real estate investments. The concept has always puzzled me, even when I looked it up. Michael’s explanation is short and to the point. Leverage makes perfect sense now.
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A simple example of financial leverage: Say you have $10 that you want to invest in a stock. If you invest that $10 and it goes up 10%, you’ve made $1. However, if you’re able to borrow an additional $90 to purchase that stock, you’d have $100 total to invest. If that stock goes up 10%, you’ve made $10. This is leverage: borrowing money to magnify returns. (Of course, losses are magnified as well.)
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A home mortgage is a common example of leverage in practice. In general, a homebuyer has only a small amount of the purchase price. Most of the money for the transaction is borrowed from a bank. House prices tend to increase with time. By using leverage to purchase a house, we’re able to magnify our return on equity.
Why do I like Michael’s video series so much? (And make no mistake: I love it. I’m learning a lot.) Because he’s able to present these financial concepts clearly, in a way that makes sense. Compare his succinct definition of leverage to the definition at Investopedia:
1. The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
2. The amount of debt used to finance a firm’s assets. A firm with significantly more debt than equity is considered to be highly leveraged.
Huh?
On Monday, Michael explains financial statements. Then he dives into stocks, bonds, and financial markets!
We already knew Millennials were selfish and bad savers, so it probably comes as no surprise that they don’t know the first thing about closing costs.
They just seem to know that they want to buy a home, regardless of the costs involved, which I suppose is somewhat bittersweet to those in the industry.
While many see the 18-34 age group as the future of the real estate market, mainly because of their immense size, their perceived lack of knowledge may come off as a bit disconcerting.
A new survey from ClosingCorp, a provider of real estate closing data, found that two out of three Millennials who plan to own a home are “Not At All” aware of closing costs.
Closing costs include things like title insurance and escrow fees, appraisal fees, lender fees, home inspections, and so on.
The fees are quite substantial, and can range anywhere from two to five percent (or more) of the purchase price, so they shouldn’t be taken lightly or ignored.
The good news is that either the buyer or the seller can pay them, so even if young buyers are unaware of the costs, they might be able to avoid paying them out-of-pocket.
That means the deals should still close, though it does kind of tell you that these prospective buyers may be ill-prepared to purchase real estate.
Even if the loans close, these borrowers may not get the best deals, or they may wind up in over their heads.
Older Folks Clearer on Closing
Older folks seem to be a lot more knowledgeable, perhaps because they’ve already been there before.
As you can see from the graph, those 55 and older are well aware of closing costs, and most 35+ are also pretty aware.
However, across all age brackets more than one third of potential home buyers indicated that they were either “Not Very” or “Not At All” aware of closing costs.
So there’s still a major lack of financial literacy in this country, which is something I’ve been disappointed about for a long time.
Where do you learn about these things? And when? Only after making a mistake the first time around?
Well, the survey also answers that question, though the learning seems to come from interested parties, not from an impartial university professor or housing counselor.
When asked how they learned about closing costs, the overwhelming response was from their real estate agent.
Many also learned about closing costs from independent research, so kudos to them for trying to make sense of it all.
For Millennials, they were twice as likely to get the lowdown from a real estate agent than a lender.
ClosingCorp CEO Brian Benson noted that the results show “Millennials are more dependent on realtors than previously presumed.”
That’s somewhat ironic given the fact that they grew up in the Internet age, where everything can be researched in mere seconds at the tap of a button.
Read more: Is your real estate agent choosing your lender for you?
The series on Roth Individual Retirement Arrangements (Roth IRAs) has covered a number of topics — what they are, how (and where) to open one, and which investments are best. Now, in the final part, we turn to some of your questions. Remember: I am not a financial adviser. I’m just a regular guy trying to gather information to help you. If you need more specific answers, please consult a CPA or an investment professional.
All of the questions below were submitted by Get Rich Slowly readers via comment or email. If your question isn’t here, please drop us a line so we can research an answer and add it to the list. If you are new to Roth IRAs, this article is not the place to begin. Start here, instead.
Types of Accounts and How Much You Can Contribute
Which is better: Investing in a Roth IRA with after-tax dollars or investing in a 401(k) with pre-tax dollars?
Also, does it make a difference if there is an employer match?
And if I already have a 401(k) through work, then why would I want to add to a Roth IRA?
There are a lot of variables here, so the answer for your situation may be different. But the traditional answer to this question is to…
Invest in the Following Order:
If your job offers a 401(k), contribute to that each year until you’ve reached the limit of the employer match. Never turn down free money!
If you still have money to invest, contribute to your Roth IRA.
If you still have money to invest, then max out your 401(k).
Once you’ve contributed all you can to these investments, then invest however you see fit in regular, taxable accounts.
Some people like to have all their accounts in one place. If you’re this sort of person, you may benefit from simply putting all your money into a 401(k) and not worrying about a Roth IRA.
However, there is another wrinkle to consider: When debating whether to invest in a 401(k) versus a Roth IRA, why not check with your employer to see if they offer a Roth 401(k) which allows you to invest with after-tax dollars (and withdraw tax-free in retirement)?
Also note that you can actually invest in both a 401(k) and a Roth IRA as long as you meet the requirements for both programs.
Is It Possible to Roll a 401(k) Into a Roth IRA?
It is possible, but you have to be careful. It is not a one-step process. Also, it’s difficult to do with an active 401(k) account. A mistake along the way could cost you a lot of money, so it’s a good idea to consult a financial adviser for help.
Here’s a discussion of the subject in the forum.
Can I have more than one Roth IRA? For example, can I have one at USAA and another at Vanguard?
To understand the answer, let’s step back and look at what an IRA is exactly: The “A” in IRA does not stand for “account.” If you look on the IRS website, you will see that the official definition of “IRA” is “Individual Retirement Arrangement.”
Every taxpayer can have only one Roth arrangement, but you can have multiple accounts as part of that arrangement. You can have as many Roth IRA accounts as you’d like.
Contribution Limits for Roth IRAs (and Traditional IRAs)
Contribution limits for 2015 and 2016:
Under 50 years of age: $5,500
Age 50 and over: $6,500
Note that your contribution limit applies to all of your IRA accounts (Roth and traditional) collectively; they don’t each get a $5,500 limit. In other words, you can contribute $100 each to 40 different Roth IRA accounts, but not $1,000 to each of them.
Who Can Invest and are There Limitations?
Can legal U.S. residents who are not citizens open an IRA?
Is it a good idea?
What if I don’t plan to be in the U.S. at retirement age?
Anyone with earned income in the U.S. can contribute to a Roth IRA — citizenship is not required. However, for greater flexibility, you may want to consider a traditional IRA or other investment accounts, depending on your goals.
Be sure to check with a tax professional to see which solution best fits your exact situation.
How does the IRS know that you contributed to a Roth IRA?
How does it know if you contributed more than you were allowed?
At the end of the year, the investment company submits Form 5498 to the IRS, which reports the amount that you invested. For example, it might show that, in 2015, you invested $5,000 in a Roth IRA. The IRS computers then match this form electronically to your tax return to check for discrepancies. If you are over the income limit, your return will be flagged.
What happens if I contribute too much to a Roth IRA?
If you contribute more than allowed, you are subject to a 6 percent excess-contribution penalty. However, you have until the annual contribution deadline (generally April 15th) to withdraw any overage from the account before the penalty is assessed.
What options are there if I earn too much to contribute to a Roth IRA?
Your Contribution May Be Affected by Your Modified AGI
These tables show whether your contribution to a Roth IRA is affected by the amount of your modified AGI as computed for Roth IRA purposes. They show how to determine the amount of Roth IRA contributions that you can make for …
If you make too much to contribute to a Roth IRA, be sure you’re maxing out your 401(k), if you have one. You can also contribute to a traditional IRA.
Both of these are excellent options. But note that, if you have a 401(k) at work, your contributions to a traditional IRA may not be tax deductible. Another option for high-income individuals to consider is to contribute to an annuity.
Here are two more forum discussions about Backdoor Roth and 401(k) rollover strategies and What to do when Roth IRA isn’t an option.
My wife is a stay-at-home mom and doesn’t have any earned income. Does this mean she cannot have a Roth IRA?
To every rule, there is an exception. If you are married and filing a joint return, then both spouses can max out IRAs from a single income (so long as the other Roth IRA requirements are met).
I’m self-employed and I make more than the maximum allowable for a Roth IRA. Does a SEP-IRA make sense?
A SEP-IRA may make sense, but that will depend on your individual circumstances. Basically, self-employed people can contribute roughly 20 percent of their first $200,000 of pre-tax earnings to a SEP-IRA. However, they must contribute the same percentage for all employees. If you are the only employee, or if you don’t mind giving all employees the same retirement benefits, then this may be a good choice. This is another case in which you should consult a financial adviser.
Types of Roth IRA Investments
I want to open a Roth IRA, but I’m confused by the mutual funds offered by different companies.
For example, ING Direct (now Capital One 360) offers six funds, and another bank offers only five. What’s the difference?
Which should I choose?
Only you can answer that question. Here’s how I would approach this problem: I would first locate the investment I want to purchase. Is it an individual stock? Is it real estate? Or is it, as I encourage, an index fund?
Once you’ve decided on an investment, then find a company that will let you buy the investment from within a Roth IRA at the lowest cost. This shouldn’t take too much effort. If, like me, you decide you like Vanguard’s mutual funds, then open an account directly with Vanguard.
Can I really use my Roth IRA to buy a house?
Sort of. There’s an animal called a self-directed IRA which allows you to invest in real estate. However, you cannot invest in anything directly related to you, like your company or your primary residence. This is definitely a topic you should take up with a tax professional if you have a strong interest in doing something like this.
In many cases, complex Roth IRA questions are best answered by a qualified financial professional. Each person’s situation is different. It is difficult to give one-size-fits-all advice in the context of this blog. Use the National Association of Personal Financial Advisors to find an independent, fee-only adviser.
I opened a Roth IRA at a local bank, but I noticed that I’m only getting a 1.98% return. This seems unusually low. Should I withdraw my money and move it to Vanguard, Fidelity, or T. Rowe Price?
Your money is probably in a savings account or certificate of deposit. Your bank may offer additional financial services — check with them to see where else you can put the money. Barring that, yes, absolutely move the money to a different location. You may have to pay a transfer fee, but it’s worth it.
As Mandy writes in the forums, “Traditionally, banks are one of the worst places to invest because they typically offer high-load/high-fee or very conservative investments and charge higher service fees than most other brokerages. Banks are for banking, not investing.”
(See Which investments are best for a Roth IRA? for ideas on where to put the money.)
Withdrawing From a Roth IRA
Can I really withdraw money from my Roth IRA without penalty?
That depends on what you would consider a penalty. Here is a direct quote from the IRS website:
“You can take distributions from your IRA (including your SEP-IRA or SIMPLE-IRA) at any time. There is no need to show a hardship to take a distribution. However, your distribution will be includible in your taxable income and it may be subject to a 10% additional tax if you’re under age 59 1/2. The additional tax is 25% if you take a distribution from your SIMPLE-IRA in the first 2 years you participate in the SIMPLE IRA plan. There is no exception to the 10% additional tax specifically for hardships. See chart of exceptions to the 10% additional tax.”
Since August, I’ve been on a quest to reduce the clutter in my life. Back when I was a spendthrift, I bought a lot of Stuff. Stuff comforted me. When I was buying things (even on credit), I felt wealthy.
Stuff doesn’t make me feel wealthy anymore — it makes me feel cramped. With time, Stuff simply becomes clutter. Slowly but surely, I’m banishing excess belongings from my household. I still sometimes buy more than I ought, but mostly I’ve been guarding the borders of my life against the invasion of Stuff. Here are some of the defenses I’ve been employing:
I ignore the proverbial Joneses. One of the most dangerous paths to clutter (and to overspending) is the urge to own the same things your friends do. Peer pressure can be powerful. I’ve come to realize that lifestyles are not a competition. What does it matter what others buy? I’m content with what I have — more Stuff is not going to make me more happy.
If I don’t need it, I don’t buy it. As I’ve purged my Stuff over the past year, I’ve been shocked by how many things I bought but never used. I would see something in a store — a voice recorder, for example — and convince myself that I needed it. Or I would tell myself, “I might as well buy a jig saw — we’ll need one in the new house.” But I used the jig saw only once in four years (on the day we moved in). I never used the voice recorder at all! These items are clutter, and were a waste of money. I’ve learned not to buy something unless I know I’ll use it.
I try to value experiences instead of things. Make no mistake — experiences still cost money. But a trip to England or the entrance fee to a marathon or a nice dinner with friends all share a common characteristic: they don’t take up space in my home. I get value for my money, and there’s no residual Stuff.
I’m trying to practice the one-in, one-out rule. I’ll admit up front that I’m not good at this, but Kris is trying to teach me. I’m attempting to keep a steady state of Stuff. If I have, for example, twelve pairs of socks, and then buy another, I must get rid of one pair. Practicing this rule prevents a build-up of Stuff.
I focus on quality. It’s been difficult for me to realize that sometimes it makes sense to pay more for the things I buy. My instinct is to buy whatever’s cheapest. (And sometimes that is the best choice.) But I’m learning to base my purchase decisions on the value an item will give me. Often it makes more sense to have one excellent expensive item than to have several lousy cheap ones. The lousy items just become clutter.
I borrow and lend. Shakespeare might have advised against it, but I’ve found that by borrowing and lending things among friends, there’s less we each need to own. I’ve loaned out a drill, a rototiller, some golf clubs. I’ve borrowed books, a video camera, a lamp. By sharing these items, we’re each able to have less Stuff in our lives.
I’ve reduced my exposure to advertising. Since I stopped watching television a few years ago, I buy much less Stuff. But it’s not just television. I used to enjoy reading the ads in magazines. Now I try to ignore them. The less I pay attention to advertising, the less I buy.
I don’t want to pretend like I have Stuff licked. I don’t. I’m still especially susceptible to free and cheap things. In the past year, for example, I’ve dragged home:
A carload of scrap lumber I picked up for free. (Admittedly, this did get used as a border to our garden.)
Several pieces of free exercise equipment that have remained unused in our garage.
A box of free books — books that I now realize I will never read.
Just because something is free or cheap doesn’t mean it’s a bargain. If I don’t need it, I shouldn’t bring it home. Despite this weakness in my defenses, the tide of the battle has turned. I’m winning the war against Stuff.
There’s nothing wrong with owning Stuff that you use and value. But when you accumulate Stuff that you never use, that’s a problem. Guard your borders. In his excellent The Joy of Simple Living, Jeff Davidson writes, “By keeping watch over what enters your personal kingdom, you end having to initiate possession-purging exercises.” The best way to cope with Stuff is to never let it into your house.
Have you ever felt scared, nervous, or anxious around money? Do you set a path for yourself, and then change your mind, worried that it might go wrong?
It’s natural to want to avoid making mistakes, especially when it comes to your money. But indecision can prevent you from getting what you really want.
Here are some ways to reframe your thinking around money, so you can take the small steps that give you the confidence to take bigger steps.
What’s Ahead:
Do you know what you want?
In a general sense, do you know what your financial priorities are?
Sometimes it can be hard to figure out which are your priorities and which are your pressures. Perhaps a parent or partner is pushing you to make a particular decision. It takes a lot of fortitude to stand up to pressure like that, especially if you feel unsure or inexperienced.
But it’s also important to know what your own goals are. What if your dad thinks you should be an engineer, but it’s you who will have to shoulder those loans? Your mom found the perfect car for you — but is she going to help with the car note?
Or maybe you just have a different idea of what is perfect. Perhaps your partner is pushing for a move when you feel you should stay where you are — or wants to stay when you know there are better opportunities elsewhere.
Visualize your dreams
Taking some quiet time to visualize what you want, independent of what others want for you, is the first step toward knowing what to do.
To help you get an idea of what your goals are, you’re going to do a financial visualization exercise. You’ll need a pen, a piece of paper, a quiet room, and a timer. You will visualize your future life, if you could be or do whatever you wanted.
Set the timer for five minutes. For those five minutes, you are going to close your eyes and imagine yourself five years from now. Get as detailed as you can – it doesn’t have to be realistic, and you don’t have to share this with anyone else, just yourself. Be honest.
If you could do or be (or have) whatever you wanted five years from now, what stands out?
How old will you be?
What are you wearing?
Where are you living?
Who is with you?
What are you doing?
Open your eyes and write down what you visualized. What excited you most, or made you feel most at peace?
Whatever it was, write it down and circle it. This exercise gives you an idea of what to work toward, so keep that paper in a secure location and come back to it often.
If pen and paper alone make it difficult to visualize your future finances, try tracking yours through PocketSmith first. PocketSmith can show you your big financial future, making visualizing your goals even easier.
It’s OK if you don’t get it ‘perfect’
There’s no “perfect.” All you can do is make a good-enough decision with the information you have available to you. So many things can be changed later! Making mistakes is how you learn.
I’ve made some incredibly bone-headed financial decisions (including the time I put a whole dang car on my credit card, but that’s another story). The people I love have done dumb financial things, too. (Such as buying meat that “fell off the back of a truck.” Never do that.)
My favorite Maya Angelou quote is this:
“Do the best you can until you know better. Then when you know better, do better.”
Buried within that quote is the permission to learn as you make a mistake.
You can’t get through life with a perfect record or without any bad things happening to you. But what you can do is trust yourself to figure out what to do if things go wrong. If you’re reading this, it means you are willing to find out how to “know better.”
If you’re beating yourself up because of mistakes you’ve made in the past, stop. You don’t have to be stuck as that person: You can learn from that mistake what not to do, and then figure out a way to fix it. It might be very difficult. It might feel impossible. It’s OK if you don’t get it perfect. You know better, so now you can do better.
First, make sure you have a bank account
You don’t have to have all the answers immediately. Give yourself permission to work on one thing at a time. Baby steps are good here because it will break down your financials into manageable tasks.
First things first. Do you have a bank account? If not, you’ll need a safe place to keep your money.
Checking accounts
A checking account is a type of bank account that lets you spend your money by using checks or a debit card. You should have a checking account so you have a place to put your money when it comes in.
Sometimes checking accounts come with high monthly fees, which is why it’s important to shop around a little bit. If you don’t have a checking account currently, you can look for a checking account at a local bank in your neighborhood, or you can look for a checking account at an online bank, which often has lower fees. Consider these points:
Find three possible checking accounts you might consider signing up for.
Look at the fees for each account and compare them. Which has the lowest fees?
Look at the overdraft protection for each account and how much it costs. If you accidentally overdraft, which bank will cost the least?
The bank with the best ratings and lowest fees is probably your best bet. You can usually sign up for a checking account online or visit the bank branch of a physical bank to open an account.
Aspiration is a great option for a company that chooses not to fund fossil fuel exploration or productions. With Aspiration’s Standard’s fossil-fuel-free, choose your own fee account, you’ll be eligible for a free Spend & Save account. Also, you’ll earn between up to 3%-5% cash back at mission-focused merchants and get fee-free withdrawals at over 55,000 Allpoint network ATMs.
Savings account
A savings account is a bank account where you keep the money you want to save, which you don’t need for bills or other spending. Look for a savings account at the same bank where you opened your checking account. Or if that is not possible, you can open a savings account at an online bank.
Check if your bank allows electronic transfers. You can often use your bank’s online portal to transfer money from your checking account to a savings account, even at another bank. When looking for a savings account, look for one that pays a good interest rate. Online banks often pay higher interest rates on your savings than physical banks.
If you were intrigued by Aspiration’s Spend & Save account (above), but you’re specifically looking for a savings account, you may be interested in opting for Aspiration Plus. With Aspiration Plus, you can earn up5.00% APY (Variable). You’ll also have the opportunity to earn up to 10% cash-back with purchases you make with Conscience Coalition retailers (companies doing the ‘right thing’ as part of their business model) and unlimited fee-free withdrawals at Aspiration’s network of over $55,000 ATMs. You’ll also get Aspiration Planet Protection feature which carbon-offsets your gas purchases. These perks certainly help offset the $7.99 monthly fee ($5.99 if you pay annually) that is required with Aspiration Plus.
Chime®, another option, offers a 2.00% APY7 with no monthly fees or minimum deposit requirements.2 Plus, you’ll get top-notch features like the ability to round up your debit card purchases and put that money into a savings account automatically.^
Plus, as an added bonus, Chime now allows you to get your paycheck up to two days early if you have direct deposit! Early Access to direct deposit funds depends on payer.3
^ Round Ups automatically round up debit card purchases to the nearest dollar and transfer the round up from your Chime Checking Account to your savings account. 2 There’s no fee for the Chime Savings Account. Cash withdrawal and Third-party fees may apply to Chime Checking Accounts. You must have a Chime Checking Account to open a Chime Savings Account. 3 Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date. 7 The Annual Percentage Yield (“APY”) for the Chime Savings Account is variable and may change at any time. The disclosed APY is effective as of November 17, 2022. No minimum balance required. Must have $0.01 in savings to earn interest.
Now, you need to make a budget
Once you have a place to put your money, try tracking it to see where it’s going. Knowledge is power, and this is a very powerful piece of knowledge that can inform your decisions and even tell you a bit about yourself through what you spend or don’t spend.
Start by getting a notebook and writing down what you spend every day, no matter how small. Write down every purchase, including the cash ones, as well as your bills and loans. Do it every day for one month. That is tracking your expenses.
To make a budget, you look to the future instead of the past. Write down how much money you have coming in via your paycheck or other earnings. Include any loans coming to you — every source of money coming in for the month. Then consider all of your expenses that money has to cover: rent or mortgage, car payment, health insurance, bills, food, gas. Go through your last month of tracked expenses to make sure you aren’t missing anything.
Your budget is your money plan for the month. First, you make sure you have enough to cover your obligations, which are your bills. Then once your bills are covered, you decide how to spend what’s left between savings and wants.
There are some simple rules of thumb for making a budget. One is the 80/20 rule, where you put 20% of your money toward savings and use the other 80% for spending. If that’s too simplistic, try the 50/30/20 rule, where you put 20% of your money toward savings, 50% towards bills and other obligations, and the last 30% towards wants. It should help you decide if your current spending is in line.
Either way, you can see that setting aside a good portion of your budget to savings is very important.
You can do this all on paper, but sometimes it’s helpful to have an app help you with the calculations. Here are a couple of great options:
Pocketsmith
If you have trouble getting (and staying) organized, Pocketsmith is a great tool to have.
It’s a personal finance app that’s a little like having a personal financial assistant in your pocket. It can help you plan and budget your money, so you can know today whether you can take a vacation three months from now.
Empower
I thought Empower was only for wealthy people with portfolios to manage, but it actually helps anyone. When you connect your accounts, including loans and credit cards, the Empower dashboard gives you a big-picture overview of your financial situation.
Charts and graphs show you your cash flow month-to-month and even break down your spending categories. (I was a little bit shocked to see how much I was spending on dining out compared to groceries, honestly.) Oh, and it’s free.
(Personal Capital is now Empower)
And now, the not so fun part…debt
Whatever you do, don’t give up on getting out of debt. Keep making forward progress, even if it’s only a little bit. Imagine how much money you’d have each month if you didn’t have to make loan payments! The more you can throw at your loans, the sooner you will be free of them. Even if it’s uncomfortable for a little while, the payoff can be worth it.
Using your budget, look at how much you are spending on your debt and how much you are spending on your wants. Look for where you can trim your wants and non-essentials and put that money toward your debt payments. See if you can add even 1% more toward your debt this month, and 1% more next month, and 1% more the month after that … start small, but you may soon see you can spare 2%, 5%, even 10%, or more.
When your debt is really and truly unmanageable, refinancing might be a good solution: it can sometimes reduce your overall interest rate, lowering the overall interest you pay, and getting you free of debt sooner. Here are some companies to check out:
Earnest
Earnest helps you refinance your student loans, so you pay less interest. It rolls all your existing loans into a new loan, so you have one rate and one payment.
You can also eliminate a co-signer that way. Before you refinance federal loans, though, see whether you’ll be locking yourself out of any forgiveness programs first.
Credible
Credible is an online marketplace that matches you up with the best loans and rates for refinancing based on your personal money profile.
You may be able to reduce your rate this by shopping around through Credible. Or you might at least be able to reduce your monthly payment (though they might extend the length of the loan, so check the terms). The less interest you pay, the better.
Credible Credit Disclosure – Requesting prequalified rates on Credible is free and doesn’t affect your credit score. However, applying for or closing a loan will involve a hard credit pull that impacts your credit score and closing a loan will result in costs to you.
Don’t forget to try to save some, too
Sometimes it feels like there’s nothing left at the end of the month to put toward savings. If that’s your situation, put technology to work helping you find the spare change that can start to add up.
You should aim to put 20% of your money into savings. However, I know that’s not always easy to do, especially when you’re just starting. So keep that in mind as your goal and be OK with starting small. Super small, even. Since you’ve started your checking and savings accounts, you should now have a place to put your savings.
And since you’ve created your budget, you should have a grasp of how much you are spending on bills. Your challenge will be to find small amounts, $5 here and there, which you can safely transfer to your savings account and leave untouched. Here are a few apps that can help:
Acorns
Acorns is a handy little app that finds your “spare change” and squirrels it away for you. Say you make a purchase for $5.75. Then Acorns will round up to $6 and put the extra 25 cents in your Acorns account. It’s a little bit here and there that you won’t notice is missing.
I have a friend who signed up for Acorns, and it helped her save $1,200 in a year – that’s money she didn’t notice over the course of a month, because Acorns rounds up purchases and socks away the change. It’s a way to invest without having a lot of money.
Trim
Another app that helps you save is Trim. It analyzes your spending and finds ways to save your money, even contacting companies and negotiating lower bills for you.
So if you feel like you’re spending too much on your cable bill, Trim can negotiate that lower. Then you can put the money you saved with Trim into your savings account every month.
CIT Savings Builder
Once you’ve found some savings to save, putting it in an online savings account can help you earn money.
Take the CIT Savings Builder: You’ll earn up to 1.00% APY. So if you can add to your account every month, they’ll pay you, too. This is a great way for those facing financial indecision to finally kick the habit. If you don’t save at least $100/month (which isn’t a terrible benchmark), you’ll be stuck with a much lower APY. See details here.
CIT Bank. Member FDIC.
Lean on your resiliency
It’s important to give yourself some grace. As long as you’re trying your best and continuing to learn about money management, you’ll be moving in a forward direction. When you’re feeling stuck in your indecision, remember that you can change your mind later. If you sign up for a new savings account, and it charges way more in fees than you expected, you have two choices: beat yourself up, or simply change accounts. One of those will make you feel like a failure, and the other one lets you dust yourself off and move forward.
Even if the mistake you make is catastrophic (and be honest with yourself, they are rare and you can usually see them coming), you can always rebuild. The worst you can do is bankruptcy, and you won’t be the first (nor the last), and you can come back from it.
The skill of resiliency, of knowing you can find a way to figure it out, is an important one when it comes to managing your money.
You might lose your job, but you can learn a new skill. Better yet, you can slowly build up your emergency fund so that if it does happen, you can be prepared.
Summary
Managing your money can be very overwhelming. It is all too easy to get paralyzed by fear when trying to decide what to do, or to have so many actions to take you can’t figure out where to start first.
It’s OK to go slowly. Pick one small thing each month to focus on. Don’t try to do too much at once or you will get overwhelmed. This month, make it your checking account. Next month, savings. A month after, track expenses. Give yourself grace if you find it difficult, but get back in the saddle and keep trying.
Know better, so you can do better. Take the first step, and savor your wins when you get them. The more experience you have, the more confidence you will have, and then you will have faith in yourself when it comes time to make bigger decisions: Not only faith that you will make the right choice, but faith that, if you make the wrong choice, you can figure out a way to bounce back.
Empower Personal Wealth, LLC (“EPW”) compensates Webpals Systems S. C LTD for new leads. Webpals Systems S. C LTD is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.