Why use a credit union?

November 8, 2011 By Leave a Comment


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.

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Why you should invest in a 401K

October 11, 2011 By Leave a Comment


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.

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Strategy to pay off credit card debt

September 12, 2011 By Leave a Comment


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.

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

August 14, 2011 By Leave a Comment


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.

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