How to plan for retirement



Each month, financial expert Shay Olivarria answers personal finance questions from readers. This month she addresses retirement planning.

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Reader: How do you start a retirement portfolio on a budget?

Dear Reader,

What a great question. As the New Year begins, many of us would like to firm up our financial position. The question becomes how to do that when the dollars aren’t making any sense. Starting a retirement portfolio is a bit more complicated than I can cover in one article.

I have a chapter about the topic in each of my books, Money Matters: The Get It Done in 1 Minute Workbook and 10 Things College Students Need to Know About Money. For right now, I’ll offer a brief overview of the process.

If you have an employer-sponsored plan:

• If you have a 401k or 403b at your job, take advantage of it. Many times, employers will offer “matching” to employees. That’s free money that they will contribute to your retirement fund in lieu of a pension plan. If you don’t contribute anything, they won’t “match” it. Talk with your Human Resource Office to find out 1) If your company offers a retirement plan 2) If your company “matches” 3) What the “match” is 4) How you can sign up immediately.

• When you start taking advantage of the employer-sponsored plan the money will come directly out of your check before you get it. That’s great because the money that you contribute to your retirement will not be assessed taxes. If it was going to go to Uncle Sam anyway, why not invest it for yourself?

• Your job will already have an investment firm that they work with and a set of funds you can invest in. You can usually speak with a representative from the company for free if you’re having trouble choosing.

• If you want to leave your job you can take your retirement money with you, but don’t take it out of the company it’s invested in. You want to have the funds “rolled over” from the old account to the new account so taxes won’t be levied. Once the funds are distributed (if they send you a check) then the government will swoop in to take its cut.

If you don’t have an employer-sponsored plan:

• If you don’t have access to an employee-sponsored retirement plan, then you’ll have to opt for a Traditional or Roth Individual Retirement Account (IRA).

• The big difference between the accounts is when you pay taxes.

• You’ll have to find an investment firm that offers mutual funds and then open an account. Most firms will let you start an account with no money as long as you promise to deposit at least $50 per month via electronic transfer from your checking account.

• Start putting all the change in your pocket at the end of the day in a savings jar. The average American will end up with about $50 in change per month. Deposit that money in the bank each month and you have your deposit. If you only invested that $600 per year into a tax-deferred investment account you’d end up with around $163,241.14, assuming a conservative 8% yearly earnings over forty years. You put in $24,000 of spare nickels and pennies and you end up with more than $160k.

• An important thing to look into when choosing a firm to work with is how much money will be taken out to manage the fund. You want a no-load fund with low costs. 1% is average. Try for lower if you can.

• The money is always yours. You can deposit and/or withdraw it as you see fit. Keep in mind that there are limits for how much money you can deposit every year (limits depend on your age, if you have an employee-sponsored plan, and income) and there could be tax consequences for withdrawals.

There are many considerations when dealing with retirement accounts. If you have specific questions please contact a fee-only advisor. Find one near you at http://www.napfa.org/.

About Shay Olivarria
Shay Olivarria is a financial education speaker and the author of three books on personal finance. She has written articles for Bankrate.com, FoxBusiness.com and The Credit Union Times, among others. To find out more about her work, visit her at www.BiggerThanYourBlock.com

Seven tips for buying a used car



Each month, financial expert Shay Olivarria answers personal finance questions from readers. This month she addresses how to not break the bank in the holiday gift giving season

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As tax time rolls around, many people have started to talk about buying a car. With the economy being the way it is, many of those people are considering buying a used car. There are some good deals to be had when buying a used car, but there are also some horror stories about deals gone wrong. Here are seven tips to help you choose the right car and make the right deal on your next used car purchase.

See what’s available on Craigslist.org and AutoTrader.com
Everywhere you look people are offering cars for sale. From cars parked on the street to a plethora of websites that allow sellers to post their cars. A couple of great websites to search for a used car are Craigslist.org and AutoTrader.com. Both sites list used cars from private sellers and dealers. Both sites are searchable by price and type of car. As you’re looking at cars don’t forget to check:

Is the car currently registered? You want a car that is.
Does the car have a salvage title? If it does, it means that the car has been in some kind of accident. You want a car that does not have a salvage title.
How many miles does it have? The average is about 12,000 miles per year. Knowing how many miles the car has versus how many is should have will tell you a lot about the car.
Does the seller have maintenance records? A car is a machine. The better the car has been taken care of the less worry you’ll have about potential problems.
Does it have everything that you are looking for? Power windows/locks? An alarm? A CD player? Seat warmers? Drink holders?

Once you see a few cars that you like you’ll need to find out if the car is really worth what the seller wants to sell the car for. You are the one buying the car. You have a choice in what you want to buy. You have every right to get the most value for your dollar.

Check the Kbb.com value
To find out if the price the seller is asking for the car is reasonable, you’ll need to visit the Kelly Blue Book site at Kbb.com. Input the car’s year, make, model, miles, and body type to have the website estimate what the car’s value. If what the seller wants and what KBB says it’s worth are in the same range: hooray! If not, you’ll need to decide if you’re willing to try to haggle with the seller or if you want to move on to another car.

Print out everything
Once you find a car that you want to see, print all the paperwork relating to the car. That means you need to print out the original listing (people will ask for more once you are on site), the KBB information, and any other information that you have found relating to the car. Have everything in front of you before you call.

Start calling
Give the seller a ring. Make sure to ask any questions that you have before you make a plan to see the car. Also, listen to the person to whom you are speaking. Do they sound like someone you want to do business with? What does your gut tell you? You don’t want to put yourself in a situation where you might get involved in a bad deal or put yourself in physical danger. If anything about the person makes you uncomfortable, move on to the next car on your list.

Take a look-see
Show up on time and take a thorough look at the car. Definitely drive it on the street as well as the freeway. There is really no way to know how safe a car is without a mechanic taking a look at it, but there are some things to check for before you pay a mechanic. Check for:

How much tread is on the tires? Make sure there are no bald spots and definitely no metal pieces showing.
Is there an oil leak? Leave the car running and check the engine and on the ground under the engine. If you see drips of dark fluid or puddles of dark fluid then there may be a problem.
Are there any other leaks? Check for green fluid (coolant), red fluid (steering fluid), or any other strange fluids.
Does the car need an alignment? When you are driving, notice if the steering wheel is tugging in any direction. It shouldn’t be.
Does the starter work? When you start the car, is it difficult to turn the starter? It shouldn’t be.
How is the electrical system? Do the dashboard lights come on? The overhead light? The lights for the radio and A/C?
Are the lights functioning? Take a look at the headlights, turning signals, and brake lights. Make sure they all function appropriately.
Does everything else work? Turn on the radio, air, heat, and anything else you concerned about. Are they functioning correctly?

If you are okay with everything up to this point, it’s time to have a professional mechanic take a look at the car. This is where things can get rocky.

Get an AAA check-up
Having the car checked out by a professional mechanic should be non-negotiable. The worse thing that could happen is you end up buying a lemon because you didn’t want to spend the $90 to have a professional look at it. The American Automobile Club offers a great service for members looking for a used car. Any AAA-approved auto center will perform a once-over and provide you with a written report for only $90. Most mechanics have similar products. Ask at your favorite mechanic’s shop.

To get the car checked-out you’ll have to get the current owner’s approval. Some owners may become upset when they hear that you want to have a mechanic check it out. They will tell you that the car is sound, that there is no reason for a mechanic, that you don’t trust them. Of course you don’t trust them, you don’t even know them! If they won’t let you have it checked out, do not buy the car. Obviously, they know something about the car that they don’t want you to know.

If you are able to get a mechanic to look at the car and the report comes back clear, then you are on your way to making a deal.

Sign the paperwork
If everything is up to snuff, you’ll need to sign some documents to make the sale official. All the forms can be found online. You’ll need:
• California Certificate of Title or Application for Duplicate Title (REG 227)
• Signature(s) of seller(s) and lienholder, if any
• Signature(s) of buyer(s)
• Transfer fee

You may also need:
• Smog certification
• Use tax and/or various other fees
• Additional documentation
If you have any questions about the paperwork required, you should call the DMV at 1-800-777-0133 to speak to an operator between the hours of 8 a.m. and 5 p.m. Monday – Friday, Pacific Time.
Buying a used car can be an undertaking, but there’s no greater feeling than driving your new car knowing that you don’t have a car payment. Happy car hunting!

About Shay Olivarria
Shay Olivarria is a financial education speaker and the author of three books on personal finance. She has written articles for Bankrate.com, FoxBusiness.com and The Credit Union Times, among others. To find out more about her work, visit her at www.BiggerThanYourBlock.com

The best low-cost gifts this holiday season



Each month, financial expert Shay Olivarria answers personal finance questions from readers. This month she addresses how to not break the bank in the holiday gift giving season

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Reader: I love my family. I usually spend a lot for presents during the holiday season, but I don’t think I can do it this year. I don’t want my friends and family to think that I care about them any less, but I can’t get any more into debt. Are there any cheap deals this year?

Yep! The holiday season is upon us and according to the National Retail Federation, Americans are expected to spend $704 million on holiday gifts. That amount of holiday spending is considered “average,” but many of us are concerned about how the future of our income, not to mention our savings, and many people are making the decision not to spend a penny this holiday. Let’s take a look at some of the best holiday gifts available that will be good for your loved ones and your pocketbook.

Time Doing Nothing
The best gift this year is definitely Time Doing Nothing with loved ones. Think back over your life. Haven’t some of the happiest memories been sitting around the house with your friends and family laughing about things that only your group finds funny. Don’t be quick to dismiss this gift out of hand. This may be the hottest gift of the season.

Playing Together
Another hot item this year is Playing Together. It doesn’t matter if it’s playing a card game or playing a physical game — friendly competition is all the rage this season. We all like to tell the story of the time we finally beat our father-in-law at dominoes or the one about all the cousins having a footrace in the street. Playing Together will bring memories of this holiday season for years to come.

Encouraging Each Other
This one is sure to be the one everyone is talking about. One of the best gifts is the gift of Encouraging Each Other. The seeds of confidence this gift provides will last long after the wrapping paper has been picked up and the tree is out on the curb. Haven’t we all benefited from this gift from time to time? It doesn’t matter if it’s a huge bag of “You’re great at ________” or a small box of, “’I really appreciate you ________.” Make an effort this holiday season to give this gift to everyone you meet.

Group Photos
The last gift on your list should definitely be Group Photos. Nothing puts people in a better mood than seeing themselves with their loved ones. Take photos during the season and after January 1, send an email with the photos attached and a cheery note.

I know you expected me to talk about the latest gadget or coolest toy, but these are gifts that will your loved ones will enjoy and they won’t cost you an arm and a leg. The spirit of Christmas is about appreciating each other and sharing that feeling.

May you truly enjoy your Christmas this year.

Do you have a question you’d like Shay to answer? Email Shay at [email protected].

About Shay Olivarria
Shay Olivarria is a financial education speaker and the author of three books on personal finance. She has written articles for Bankrate.com, FoxBusiness.com and The Credit Union Times, among others. To find out more about her work, visit her at www.BiggerThanYourBlock.com

Why use a credit union?



Each month, financial expert Shay Olivarria answers personal finance questions from readers. This month she addresses the benefits of credit unions.

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Reader: I heard all this stuff on the news about banks and credit unions and the Occupy Wall Street movement trying to get people to move to a credit union. Why would we want to leave banks?

Saturday, November 5th was National Bank Transfer Day. The goal was to try and get as many people as possible to leave traditional banks and open accounts at local credit unions. Banks spend millions of dollars every year trying to convince potential customers that banks are the way to go, but credit unions have some significant benefits.

Not-for-Profit

The one difference that sets it apart from other banking institutions is that credit unions are not-for-profit. That means they exist to help their members, not to make money. With that being the driving force, everything they do is handled differently thank for-profit banks.

You’re an owner

When you open an account at a credit union (you can find one at www.CreditUnion.coop) you become a member-owner of that credit union. That means that you can vote on things and your voice can be heard. Each credit union has different requirements for membership, but LA Financial Credit Union is open to “people who live, work, worship, volunteer or attend school in, Los Angeles County, California.” It’s nice to know that you have a say in what’s going on at your financial institution.

Great loan rates

Credit unions offer the same financial products as traditional banks, except for one major difference: they have better loan rates. The credit union uses the deposits of members to loan to other members. Since the bottom line isn’t to make money, but to serve the members, the loan rates (think mortgages, auto loans, credit cards, business loans, etc.) tend to be lower than traditional banks. Go online to compare rates.

Better customer service

Every year thousands of customers take a survey to share how they feel about their financial services institutions. Consistently, credit union members give higher satisfaction ratings than traditional bank customers. At credit unions you’re more than just a number, you’re a member-owner.

The most ATMS across the nation

This is a little-known fact, but credit unions have more ATMs across the country than banks. The coop network gives credit union members access to 28,000 surcharge-fee ATMs including the ATMs at 7-Elevens. Visit www.CreditUnion.coop to locate ATMs by street address or zip code. Most credit unions also have mobile phone apps to help you locate ATMs.

Your goal should be to work with a financial institution that provides the products and services you need at a fair rate while making you feel comfortable. Your financial life is your responsibility to handle. Choose from all the available options, not just the one with the most commercials on TV.

Do you have a question you’d like Shay to answer? Email Shay at [email protected].

About Shay:
Shay Olivarria is a financial education speaker and the author of three books on personal finance. She has written articles for Bankrate.com, FoxBusiness.com and The Credit Union Times, among others. To find out more about her work, visit her at www.BiggerThanYourBlock.com.

Why you should invest in a 401K



Each month, financial expert Shay Olivarria answers personal finance questions from readers. This month she addresses 401 K contributions.

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Reader: I just got a new job and HR gave me all this paperwork about my 401k. I’m not sure what “matching” is and I’m not sure if I want to give them my money. What should I do?

Congratulations on the new job. I’m thrilled to hear that your company respects its employees enough to offer a 401k retirement plan with matching contributions.

Let’s start from the beginning. Years ago, workers received pensions from their employers. For many retirees the pension, combined with Social Security payments, was enough to cover household expenses. For those with the foresight to save for retirement, the trifecta of savings, pension, and Social Security was enough to provide for many retirees to live pretty well in retirement.

Pensions are now a thing of the past. To make up for that, companies have started offering retirement vehicles that encourage individuals to invest to cover their retirement needs.

Most public companies offer a type of retirement plan called a 401k. The ones that really value their employees also offer “matching” contributions. That means that while you are encouraged to invest as much as possible towards retirement, your company will “match” the dollars that you contribute up to a certain point.

For example, if you contribute up to 6% of your income to your retirement account, then the company will match that 6%. It’s like a buy-one-get-one-free sale. If you earn $30,000 per year and contribute $1,800 per year (6% of your income) to your retirement fund, then your company will contribute another $1,800 to your retirement fund. If you contribute nothing then your company contributes nothing.

Keep in mind that matching contribution amounts differ from company to company, for those that actually offer the benefit.

It’s to your advantage to contribute as much as possible to your retirement account. There really is no down side to investing as much as you can, as often as you can. You’ll be safeguarding your retirement as well as getting free money from your employer.

Do you have a question you’d like Shay to answer? Email Shay at [email protected].

About Shay:
Shay Olivarria is a financial education speaker and the author of three books on personal finance. She has written articles for Bankrate.com, FoxBusiness.com and The Credit Union Times, among others. To find out more about her work, visit her at www.BiggerThanYourBlock.com.

Strategy to pay off credit card debt



Each month, financial expert Shay Olivarria answers personal finance questions from readers. This month she addresses paying off credit card debt.

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Reader: I’m expecting a lump sum of money. I would like to pay down my credit card debt with the money. I have several credit cards with balances ranging from $50 to $3,000. What is the best way to do this? I would like to reduce the number of payments I make each month in addition to reducing the amount of money I owe.

First of all, congratulations on coming into a tidy sum. I’m glad you’re being proactive in paying down your debt with your windfall. To know what to do, you have to know what you’re working with.

Make a list of all your debt. There should be a column for the name of the company, the amount of debt, the interest rate, and any notes about the debt. You can find a great debt worksheet in my book Money Matters: The Get It Done in 1 Minute Workbook. After you have filled in all the columns relating to the debt, you’ll have to decide which strategy you’d like to use to pay down the debt.

Choose a strategy. There are two basic ways that most people decide which debt to pay off first:

Pay by interest rate – Once you have all your debt listed on the chart take a look and see which interest rate is the highest and write a number one near it. Find the second and write a number two. Continue numerically ordering them until you have them all in order from highest interest rate to lowest interest rate. You’re going to continue paying the minimum balance on all your accounts; however you’re going to start paying a little extra on the account with the highest interest rate to help pay it off faster. Once the highest interest rate is paid off you’re going to apply all the money that you would have paid (minimum balance plus the extra bit) towards the debt with the second highest interest rate while continuing to pay the minimum on all the other accounts. Once that one is paid off you’ll move on to the third account. People like this method because it helps to cut down on the overall amount of interest you’ll pay back over the lifetime of the loan and it creates a snowball effect that helps get debt paid off quickly.

Pay by debt amount – Once you have all your debt listed on the chart, take a look and see which is the smallest amount. Write a number one near it. Find the second lowest amount and write a number two near it. Continue until each debt is in numerical order from lowest amount to highest amount. You’re going to continue paying the minimum balance on all your accounts. However, you’re going to start paying a little bit extra on the account with the lowest amount of debt. Once the smallest amount is paid off you’re going to apply the payments you would have made (minimum balance plus the extra bit) to the debt with the next highest amount. Continue this strategy until all debts are paid off. People like this strategy because it feels like you’re accomplishing the goal of paying off debts more quickly and it creates a snowball effect that helps debt get paid off quickly.

Since you mentioned that you would also like to reduce the number of payments required each month I’m going to suggest that you use the second payment strategy and pay off debt by amount owed. Once you have everything listed, use as much of your windfall as you can to pay off the smaller outstanding debts. With those smaller debts gone you’ll be able to focus your payments on the remaining debt and your credit score might increase due to your debt ratio being lowered.

Want your personal finance question answered? Ask it! Email your questions to [email protected]. I look forward to working together to build the knowledge, and net worth, of South LA residents.

About Shay:
Shay Olivarria is a financial education speaker and the author of three books on personal finance. She has written articles for Bankrate.com, FoxBusiness.com and The Credit Union Times, among others. Visit her at www.BiggerThanYourBlock.com.

Save money on back-to-school shopping with a team effort



Starting this month, financial expert Shay Olivarria and Intersections South LA team up to answer your most pressing personal finance questions on a monthly basis.

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It’s that time of year again. The kiddies will be starting back to school soon and parents will be searching for the best deals on binders, lunch boxes, and pencils. To help you save money, and keep your sanity while shopping this year, include your children in the decision making process.

First things first

Students tend to have similar needs from year to year. Ask your children to bring all the backpacks, calculators, pencils, erasers, binders, etc. from last year to the table. Ask them what they used last year, what they needed more of, what they didn’t use very often, and how they used the items mentioned. Take stock of what everyone has, what needs to be replaced, and what can be mended or repurposed.

Consider value and cost

Now that you’ve taken a look at what you need to purchase, it’s time to consider what the best value buys are. If you find yourself saying, “I bought you seventy-five of those last month and you’re telling me you’ve used them all!” then it may be time to figure out if the quality of the item isn’t that good, your child is misusing the items, your child is losing the items, or some combination of all three. Sometimes items have lower prices than others because they’re low quality. Choose items that will cost you less by not having to purchase so many. For example, what good is a $10 backpack that you’ll have to buy three times during the school year because the straps keep breaking? Purchasing one $25 backpack at the beginning of the year will end up saving you $5.

Create a list and stick to it

Okay, now you have a list of the things you need to purchase. Have you taken a moment to write down the estimated cost of each item? It’s important that you have a dollar amount in your head for each item so you don’t get caught up in the emotion of shopping and spend more than you intended.

The other great reason to create a list is to help your child get on board with finding the items and staying under budget. This will teach your child how to use a spending plan and create some positive energy around financial education. Remember to ask your child if there is something specific they would like on the list. If your spending plan for school supplies has a bottom-line number, ask your child to find a way to use the existing money to purchase the needed supplies and the items they want. You’re creating a situation for critical thought, personal empowerment, practice of mathematical concepts, and ownership. Way to go parents!

Get things for free

There are several programs that collect things for back-to-school drives every year and give them out. Ask around to find out who is doing what. Another great option is asking local businesses or local financial institutions what items they may have available. Many places have items such as calculators, pencils, etc. that they use for promotional purposes that they will give away to students when asked. Remember, if you don’t ask then you don’t get.

Come up with some cash

Sell things that you don’t use anymore to free up some money for back-to-school purchases. Have your children get involved by rounding up items around the house that they no longer use. Put the items on Craigslist.org or have a garage sale. Anything that you get rid of is clearing physical space in your home, clearing mental space in your psyche, and putting dollars in your hand.

Find the deals

Now that you have a list with dollar amounts, you’ve crossed off a few items because you got them for free and you have cash in your pockets from the garage sale, it’s time to go out and find some deals. This is the easiest part of the adventure. Circulars are mailed to your home every week advertising 10 cent pencils and 99 cent folders. Take a moment to really look through each ad and make a list of which items you want to get from each store. This is a great activity for children. You already have your list outlining what items you want to purchase at what price, so encourage your children to scour the ads for deals. It may surprise you how good they are at it. If they need some encouragement, tell them they can keep the difference between the sale and what you expected to spend.

Including your student in the process of back-to-school shopping is a fun way to get involved with their educational needs and spend some time together while saving money.

Let me know if you have any more great tips for saving money while back-to-school shopping.

Send your questions about paying off credit card debt, using financial institutions, buying a home, building wealth, etc. to [email protected] and every month I’ll answer one question. I look forward to working together to build the knowledge, and net worth, of South LA residents.

About Shay:
Shay Olivarria is a financial education speaker and the author of three books on personal finance. She has written articles for Bankrate.com, FoxBusiness.com and The Credit Union Times, among others. Visit her at www.BiggerThanYourBlock.com.