Tag: Banking

 

What Is Financial Literacy? And Why Should You Care?

Links to external websites are not managed by Chime or The Bancorp Bank.


The majority of Americans are illiterate.

Not in terms of basic reading — most of us can do that — but in terms of our finances.

When the FINRA Education Investor Foundation asked more than 25,000 Americans six simple questions about personal finance, 63% failed. Millennials fared the worst, with a passing rate of just 24%.

This lack of financial literacy is, understandably, having a huge impact on our country. Many of us are paying high bank fees, falling behind on our bills, drowning in debt, and failing to save for retirement. Clearly, something needs to change.

We’re here to help by breaking down what financial literacy means, why it matters, and how you can improve yours. Read on to learn more.

What Is Financial Literacy?

Financial literacy is the ability to understand your money.

When you’re financially literate, you have a grasp on concepts like budgeting, saving, investing, credit, debt, insurance, and interest. And, with a bit of basic knowledge, you’re able to make smart financial decisions about taxes, retirement, real estate, and college.

To Jill Fopiano, CEO of O’Brien Wealth Partners LLC, financial literacy means “the ability to understand and manage important areas of your finances so that you can meet your financial goals.”

This includes financial jargon, too.

“It is as important to be an educated consumer of financial products as it as for any other major purchase,” says Fopiano.

Knowing the difference between a Roth and traditional IRA, or compound and simple interest, for example, can significantly affect your financial future.

Why Does Financial Literacy Matter?

You may think personal finance is boring or unimportant. If you whole family is “bad with money,” you may even think you’re doomed to follow in their footsteps. But the truth is you can transform your life by learning basic financial concepts.

“Financial literacy is the foundation of a life where you feel secure and safe enough to do what you want,” explains Bobbi Rebell, a certified financial planner and host of the Financial Grownup and Money in the Morning podcasts.

“If you don’t have the information, you can’t create a path to your goals,” says Rebell.

For many, one of those goals is retirement. Whereas most Americans used to receive post-retirement benefits from their employers, fewer than 20% of today’s private sector jobs come with pensions. This means you’re responsible for your own future. And, this isn’t something that’s easy to do. In fact, the median amount of retirement savings for a working family is a paltry $5,000.

In addition to affecting your future, financial illiteracy can harm you in the present, too. Take a look:

  • In 2018, the average American lost $1,230 due to a lack of knowledge about personal finance.
  • A shocking 39% of millennial women do not pay their bills on time, resulting in costly late fees and interest charges.
  • A dearth of general financial knowledge, according to one study, cost investors $200 billion over the past 20 years.

“Financial literacy is really about empowerment,” says Fopiano.

“The more you know, the more able you are to make good decisions, avoid sketchy offers, and secure your own future.”

Four Steps to Increase Your Financial Literacy

Since only 17 states require high schools to teach personal finance, it’s important to take your education into your own hands. Here are four steps to help you get started.

1. Devour financial media

As Rebell says, “Becoming financially literate is easier than ever because of the incredible resources we all have access to.”

Feel free to consume information in a way that suits you best. Maybe you’d like to listen to podcasts during your commute; maybe you’d rather watch videos on your days off.

Here are some recommended resources:

2. Take it slowly

Financial literacy is like a tall mountain: You’re not going to reach the summit right away — or maybe ever. The best you can do is take it slowly, tackling one topic at a time.

While you should get a basic grip of personal finance as soon as possible, don’t dive deep into every topic at once. That would be overwhelming, and could discourage you from progressing further.

“Pick an area that is particularly relevant to you — say, budgeting — and commit to mastering it over the next three months. Once you have accomplished that, move on to the next area,” says Fopiano.

3. Ask for help

You probably wouldn’t try to fix your plumbing on your own. Or try to learn chemistry without a teacher. The same goes for money. Although teaching yourself is a fantastic way to get started, you may eventually need some professional assistance.

“This doesn’t have to be a self-study course,” says Fopiano.

“If you are really serious about getting your financial future in order, and could benefit from a sound financial plan, seek out a certified financial planner,” she says.

If you’re not ready for human help yet, turn to financial technology. Use Mint to create a budget and track spending, Charlie to monitor your finances as a whole, Credit Karma to track your credit scores, and Chime to save automatically.

4. Stay curious

The key to financial literacy is, of course, education.

If you dream of becoming financially secure, and stable, and maybe even wealthy, you should keep learning. You should continue your education by reading about personal finance, seeking professional help, and using technology that simplifies the process.

This is your money, after all, and it affects every single aspect of your life.

“Financial literacy is about knowing the right questions to ask. None of us have all the answers, but if we have the right questions we can get there,” says Rebell.

 

Overdraft Protection: What to Know & How to Avoid Fees

Have you ever swiped your debit card and worried that you might not have enough money in your account? If this sounds like you, you might consider overdraft protection to save you from such a predicament.

But is it worth it? Read on to learn all about overdraft protection and overdraft fees.

What is overdraft protection and how does it work?

In general, if you make a purchase with your debit card and don’t have enough funds in your account, the purchase won’t go through. This is typically called an overdraft — which is when you go below your account balance and dip into the negative territory. This situation can be awkward for you and the person behind the cash register. It also can be highly inconvenient if you need whatever you’re purchasing like now.

This is where overdraft protection comes in. Overdraft protection essentially protects you from overdrafting. So, instead of getting your card declined and leading to an uncomfortable situation, your card will go through like normal – even if you don’t have enough money in your account to cover that purchase.

But overdraft protection comes at a price, in the form of overdraft fees which can add up (more on that later). So, while overdraft protection, on the surface, can seem like a great solution to a temporary problem, it’s not all it’s cracked up to be.

So, what does overdraft protection do?

Overdraft protection is a safety net that helps you avoid overdrawing your account. In short, it’s a type of financial protection that will help float you money if you have insufficient funds. So if you swipe your debit card or try to get cash out of an ATM, you may be able to do so even if you technically don’t have enough money in your account.

If interested in this protection, you’d want to talk to your bank and enroll in the program. Additionally, it’s important to know all the upfront costs such as overdraft fees, credit line limits, etc.

Pros of overdraft protection

The main pro of overdraft protection is convenience. Overdraft protection allows purchases to go through, even if you don’t have enough funds in your account. This can save you embarrassment, inconvenience and time. You don’t have to deal with your card getting declined in public or being unable to access cash when you really need it.

How do I use my overdraft protection?

If you want to use overdraft protection, first make sure it’s something you’re signed up for. As noted above, your bank must get consent from you first to enroll you in overdraft protection.

Once you are enrolled, see if you have to link another account or a credit card to complete the process. Each bank may have different policies and procedures.

When it’s set up, overdraft protection will be in place if you overdraw your account. But remember: The hope is that you never have to use it! If you do, this means you’ve run out of money in your account, which is no fun.

Cons of overdraft protection

Overdraft protection seems good in theory but it can cost you in the long run. The fees can vary from bank to bank and your financial institution can decide what to charge. And it’s not just one charge either. You can continue getting hit with overdraft fees if your account is overdrawn.

We found that consumers can get hit with four to six overdraft fees per day. In some cases, that number can be as high as 12. What’s more: Consumers who frequently overdraft end up paying more fees than those who do not opt into overdraft protection. In fact, The Consumer Financial Protection Bureau (CFPB) found that frequent overdrafters who opt into this coverage pay nearly $450 more in fees.

On top of that, if you accrue enough overdraft fees and stay in the negative, you’re at risk of your account being closed. Having your account closed by your bank is more than just a pain, but a major inconvenience on your financial life. Just think about all the bills that are connected to that account, or not having access to your money for a period of time.

All of these are major cons of overdraft protection and should be considered carefully.

The reality of overdraft fees

Overdraft fees – by and large – are big business for many banks. In fact, the average overdraft fee is around $35. In 2017, consumers paid 34.3 billion dollars in overdraft fees in 2017, a number which has been on the rise since the Great Recession.

Even credit unions, which are often thought of as more community-minded and consumer friendly have jumped on the overdraft fee bandwagon. Overdraft fees at credit unions have nearly doubled from $15 in 2000 to $29 in 2017.

In short, overdraft fees are the bread and butter for many financial institutions. They give banks a way to make money off consumers by positioning overdraft protection as a useful service.

What does overdraft protection mean for your credit?

As noted above, in some cases your bank may offer you a line of credit or link your overdraft protection to a credit card. If linked to a credit card, you could end up paying more. Why? Because some card issuers might consider the overdraft a form of “cash advance,” which has its own set of fees, not to mention higher interest rates.

Can you overdraft if you have no money?

To get overdraft protection, your bank will typically connect a savings account and move over funds to cover the overdraft. If you don’t have any money in savings, the protection may not work.

However, other banks have overdraft lines of credit. If eligible, the bank will loan you a line of credit so that your purchases are covered, even if you don’t have enough money in your account. Of course, you will still have to pay it back, with interest, like any other line of credit.

Can you withdraw money from an ATM if you have a negative balance?

If you’re headed to the ATM to get cash, and end up taking out more than you have in your account, you will overdraft. The overdraft definition means that you “overdraw” on your account, which means taking more than you have available.

If you have overdraft protection, you will likely be able to withdraw money from your account and you’d have a negative balance.

But of course, there will be an overdraft fee attached. So while you may get the cash you need, if you don’t have the funds in your account, it will cost more in the long-run.

How can I avoid overdraft protection?

Before 2010, many consumers were unaware that they were being “opted in” to overdraft protection programs. However, starting in 2010, federal regulations shifted and required that banks get consumers’ consent to opt into overdraft protection.

To make things simple, however, you can avoid overdraft protection by not signing up for it with your bank. If you’re currently enrolled in this service, you can cancel it. This way, if you don’t have enough in your account, your purchase or transaction will get declined. While you won’t be able to make the purchase, you also won’t be hit you with an overdraft fee.

Another option is to open a bank account at Chime, which has no overdraft fees.

Lastly, to avoid this problem altogether, keep a buffer of money in your checking account. This can help you avoid dipping into the negative. Check your account balances daily and monitor your bill due dates and auto-drafts. This way you’ll know when money is coming out of your account.

Final word

There are certainly pros and cons with overdraft protection.

It can be convenient, yet costly. It can save you embarrassment and time, but also take a bite out of your hard-earned money. So, weigh these pros and cons carefully.

Final tip: If you never want to worry about an overdraft fee again, consider switching to a no-fee bank account.

 

Stop These Six Bad Money Habits and Save More Money

It’s hard to resist meeting up with friends after work for drinks, or buying that new pair of shoes right after you get paid.

But, if you want to save more money, you may have to do something to curb your spending habits. For example, do you buy a sandwich five days a week at the local bodega next to your office? Do you grab a latte every day on your way to work? Indeed, these purchases add up – fast.

Here are six habits you can easily change in order to save more money.

1. Buying coffee every day

Did you know that buying coffee Monday through Friday – especially cappuccinos and other fancy coffee drinks – can run you $25 a week or more? That’s more than $100 a month and $1,300 a year!

Instead, try brewing coffee at home and taking it with you to work. If you don’t have a coffee maker at home, purchase one on sale. Heck, you can even splurge on a fancy Nespresso machine. I bought one on sale for $199 last Christmas and absolutely love it. Yes, it was expensive. But, I now make my own lattes at home every day instead of spending five dollars a day for these drinks (yes, that’s $35 a week!)

Think of it this way: Less than six weeks of coffee runs paid for that fancy machine, which included a starter pack of 24 coffee pods. Each pod now costs around 90 cents. This leaves $4.10 a day on the table – or almost $1,500 a year to put into a bank account.

2. Purchasing lunch at work

Buying lunch every day while you’re at work will run you a pretty penny. According to CNBC, if you eat lunch out, you’ll spend an average of $10 per lunch, or about $2,500 a year.

Yet, if you make your own lunch, you’ll spend only about five to six dollars per lunch, leaving you with an extra $20-$25 a week or $1,000-$1,300 that could go into your savings account.

3. Paying full price

We get it: Not everyone likes to shop for deals or make use of those reams of CVS coupons like I do. But, you don’t have to be an expert coupon clipper to make a few small money-saving moves.

For starters, you can use shopping apps that will give you coupons, provide you with cash back or find you the best deals. Some top apps in this category include Honey, Ebates, Ibotta, and RetailMeNot.

Looking for local restaurants, activities or even a new gym? Before plunking down full price, search for neighborhood businesses on Groupon. For example, I wanted to try barre classes but I also know that boutique barre studios are expensive. So, I purchased a 10-class pass for about $79 on Groupon (or less than eight bucks a class) to a popular barre franchise. I used those classes but also discovered that I would prefer cardio classes to barre. That was a good thing as the regular price for a 10-class pack is $230! All told, using Groupon meant I saved $151.

4. Not sticking to your budget

A budget helps you stop overspending and get ahead financially.

If you haven’t created a budget yet, now is the time to do so. And, if you have a budget and still overspend, now is the time to buckle down. Why? Because if you don’t stick to your budget, it’s difficult to reach your financial goals and save money.

For example, if your budget only allows for $100 a month of “fun money” and you spend $200, that extra money has got to come from somewhere. It may mean you’re not paying off as much of your credit card debt, or you’re not saving $100 a month. Instead, commit to staying within your budget and perhaps figuring out ways to earn a bit more money each month. For instance, you can start a side hustle like driving for Uber or Lyft, walking dogs, or even teaching Pretzel Kids yoga classes.

Pick something that you can do around your schedule with little to no start-up costs. Most importantly, remember that you’ve got to live within your means if you’re going to save money.

5. Overspending on credit cards

It’s easy to spend too much with credit cards, yet this can cause you to go into debt and lead to a never-ending cycle of racking up interest. This, in turn, makes it hard to save money as any extra money you have may be going toward paying down high credit card balances.

To avoid this, try taking a break from your credit cards. Instead, use your debit card or cash. This way you’ll be more likely to buy things you can afford. Better yet, if you’re a Chime member, you can save when you spend by using your Chime Visa Debit Card. Each time you make a purchase, Chime will round up the transaction to the nearest dollar and deposit this extra change into your Chime Savings Account.

6. Not automating

Automating is our No. 1 money-saving hack. Chime helps you do this by rounding up your debit purchases. But did you also know that you can automatically save money with every paycheck?

This hack helps you save as you won’t have to manually transfer money to your savings on your own. Better yet, you won’t blow that cash on the day you get paid on a purchase you’ll later regret. Chime members, for example, can automatically save 10% of each paycheck into their Savings Account. This way your hard-earned money hits your savings automatically. Out of sight, out of mind.

Are you ready to save more money?

Even if saving money is a struggle, there are ways you can start saving right now, simply by changing a few habits. For starters, try brewing coffee and making lunches at home, shopping for deals, and sticking to your budget. From there you can take a break from your credit cards and use your debit card or cash instead. Lastly, make savings automatic.

If you follow these six simple tips, you’ll be on your way to changing your financial habits and saving more money. Are you ready to give it a try?

 

The State of Savings in America

During the recent government shutdown, thousands of federal workers filed for unemployment. While the 35-day shutdown wasn’t the employees’ fault, it did reveal their precarious financial situations.

“It is concerning that government workers with stable employment can’t make ends meet when their next paycheck is late,” says Pauline Paquin, owner of Frugaling.

“Being financially resilient is important because charging your card or resorting to payday loans is very expensive.”

The thing is: These public servants are the rule, rather than the exception. Only 39% of Americans could cover a $1,000 emergency with money from their savings. And, 19% would have to finance an emergency on a credit card, while 17% would have to borrow the money and 13% would have to reduce spending on other things.

Here’s more on the dire state of savings in America — and how you can fight back with better financial habits and a bank that has your back.

The United States of Spending

Wondering how the U.S. is doing when it comes to saving? The numbers should tell you everything you need to know:

“We live in a society where immediate gratification is something most of us think we deserve,” explains Paquin.

“We work hard, we should treat ourselves. But we fail to see the long term effect of having everything we want right now.”

Those long-term effects can include a minor emergency causing you to lose your car, then your job, then your apartment. Or they can include never being able to retire, and forcing your children to support you in old age.

“Americans struggle to save because we aren’t taught to think about money as a tool to reach our goals,” says certified financial educational instructor Galit Tsadik.

“We think of it as only something to satisfy our immediate needs. There is also this misguided notion that you need to have a lot of money to start saving or that you need to put big chunks away in order for it to be worth it,” says Tsadik.

Three Ways to Save More Money

The truth is: You can start saving money any time, with any amount. Although it may be difficult at first, making saving a habit will pay off in the end.

Here are three expert tips to get you on the right track.

1. Change your mindset

“Keep your internal money dialogue positive, otherwise you’ve already lost,” says Tsadik.

She suggests replacing negative money thoughts like “I can’t save because I don’t make enough” with positive ones like “I’m putting this extra $5 toward my future.”

“As with anything in life, your attitude matters,” she adds.

Paquin says gamifying money can lead to mindset shifts, too.

“I like saving challenges, such as saving 1% of your income this month, then 2%, etc. — or saving all the $5 bills you come across,” she explains. “Money can be fun when you make it work for you.”

2. Track your spending

“You can’t change what you can’t see,” money saving expert Andrea Woroch points out.

“By writing down all your purchases and expenses, or inputting them into an app, you can visualize your spending habits and start the process of changing those that keep you from saving… i.e. impulse buys at Target or excessive entertainment spending.”

To do this, she suggests using an app like Mint, which tracks your purchases and alerts you when you’re overspending in a certain category. She also recommends tracking your debt repayment goals through Debt Free.

Speaking of goals, write them down.

“This gives you a sense of purpose. It allows you to set parameters, such as how much you want to save and by when, instead of trying to save with nothing to guide you. That’s when a lot of people get lost and give up,” says Woroch.

3. Start small — and automate

For Tsadik, the financial educator, successful saving is “all about paying yourself first.” She advises setting up a small weekly transfer — maybe just $10 — from your checking account to your savings account.

Wait a few weeks to see if you feel the pain. If you don’t (which I’m betting you won’t!), increase the amount. Wait a few weeks, then rinse and repeat.

“Before you know it, you will have a nice little savings cushion. And you will have gradually trained yourself to live on less and save more without feeling like you are depriving yourself of anything,” says Tsadik.

How Chime Can Help You Save

Ready to kick your savings journey into high gear? You need a bank you can trust — a bank like Chime.

Chime saves you money by, first and foremost, charging zero fees. Given that the average American pays $329 in bank fees each year, that’s a huge perk.

Beyond that, Chime also helps you save money automatically. As a Chime customer, you’ll have two accounts: one for spending and one for saving. Every time you make a purchase with your debit card, we round up the transaction to the nearest dollar — and transfer that amount from your spending to your savings account.

You can also set up automatic savings from your direct deposits, funneling up to 10% of every paycheck into your savings account. If your biweekly paycheck is $2,000, that means you’d save $5,200 in a single year. Imagine what you could use that for: an emergency cushion, a Roth IRA, or a seed fund for a house.

As Tsadik says: “Money should never be the end goal — it is what we use to get us to our end goal. When you save, you are building a financial foundation so that you can accomplish your dreams and live the life you desire!”

 

Where Do Our Taxes Go? A Breakdown With the Help of Cardi B

Links to external websites are not managed by Chime or The Bancorp Bank.


As the saying goes, nothing in life is certain except for death and taxes. And every year when you file your tax returns, you may be scratching your head, thinking “Where the heck does the money go?”

Cardi B wants to know, too. Last year the superstar rapper, on an Instagram video that went viral, asked, “So you know the government is taking 40% of my taxes. And Uncle Sam, I want to know what you’re doing with my… tax money.”

This is a great question, and the answer: It’s complicated. To keep things simple, here are some figures from an article at The Hill: The federal government spent $33,054 per household and collected $26,198 in taxes. What’s the budget deficit? We’re talking $6,856 per household.

Based on this $33,054 household amount, here’s where the money went:

Social Security/Medicare: $12,401. This comes out of your paycheck, and the 15.3 percent for Social Security and Medicare is divided evenly between you and your employer. Note: If you’re self-employed, you’re responsible for the entire 15.3 percent.

Anti-Poverty Programs: $6,112. This comprises assistance programs to help the less fortunate, like aid for low-income families. Some of these programs include Medicaid, Temporary Assistance for Needy Families (TANF), food stamps, housing subsidies, child care subsidies, Supplemental Security Income (SSI) and low-income tax credits.

Defense: $5,046. This is everything from military paychecks, operations in the Middle East, and the R&D and acquisition of new technologies and equipment.

Interest on the National Debt: $2,434. Just like how you pay interest fees on credit cards, mortgages and car loans, our government pays interest on the national deficit.

Veteran’s Benefits: $1,390. This includes income and health benefits provided to our veterans. 

Federal Employee Retirement Benefits: $1,098. This goes toward retirement benefits for federal employees.

Justice Administration: $546.  This is earmarked toward law-enforcement grant programs, and paying for federal attorneys and prisons.

Education: $536. While the majority of education spending comes from a city and state level, nine percent of K-12 education spending comes from the federal government. Where does the money go exactly? The lion’s share goes to low-income school districts, college student financial aid, and special education.

Health Research and Regulation: $533. This goes toward dozens of grant programs for health providers, as well as the National Institute of Health (NIH), Centers for Disease Control (CDC), and the Food and Drug Administration (FDA).

Highways and Mass Transit: $487. This is funded primarily by the 18.4 cent per gallon tax you pay on gas.

International Affairs: $371. This includes contributions to the UN, operation of American embassies abroad, and economic and military assistance to other countries.

Disaster Relief: $338. This amount provided assistance and relief to hurricanes and natural disasters.

Miscellaneous: $1,761. If you’ve been crunching the numbers, you might have noticed that there’s $1,761 still left to be spent. This remainder is distributed to federal programs that aren’t listed, such as unemployment benefits, social services, natural resources, farm subsidies, and space exploration.

Tax Filing Tips

Now that you have a basic idea of where the money paid from your federal taxes goes, how can you best prepare to file your tax return in 2019? Take a look at some of these tips:

Get Started Early. With all the changes from the Tax Cuts and Jobs Act and this historic, epic government shutdown, filing a return for the 2019 tax year might be a tad more complicated than in previous years. So, it’s important to get a jump on tax prepping as soon as you can.

If you’re going the DIY route, and using software to file on your own, gather all the required documents to file your taxes – starting with your wage and income statements (i.e. W-2s and 1099s). Have your receipts or credit card statements handy in case you need to include deductions. You can even try tracking some of your spending using a money management app.

If you’re working with a tax pro, ask her what documents you’ll need to gather to get the process rolling.

You can file your return as soon as it’s ready and this way you’ll get a refund sooner. And just think: This might be a nice boost to your savings as the average tax refund is $2,895 (this can vary by state.)

Consider Whether You Need an Extension. Need more time to file? You can ask for an extension. It gives you six more months to file, and pushes the deadline from April 15th to October 15th. Remember: Receiving an extension means you have more time to file, but payment for any taxes owed are still due by April 15th.

The More You Know

So there you have it. Both you and Cardi B now have a clear idea as to where those government tax dollars are going. It’s now your turn to file your tax return!

 

The Ultimate Guide to Building Your Emergency Fund

Links to external websites are not managed by Chime or The Bancorp Bank.


What’s worse than an unexpected car repair, some urgent dental work, or losing your job? Not having enough of a financial cushion to get through this rough patch.

This is why you need an emergency fund. And we get it: It’s super hard to save up for unknown future expenses. Why is that? It may be that you’re staving off the uncontrollable impulse to spend until your bank account balance hits zero. Or maybe you’re inclined to cave in to FOMO. Or perhaps you simply don’t earn enough to save a ton. Whatever your reason, starting and maintaining an e-fund is a tall order.

However, it’s entirely possible to start an emergency fund. In this ultimate guide, we’ll go over everything you need to know about creating an emergency fund, including how to start, when to contribute, and how to keep it going.

Create a Designated Account

First things first: Set up a different savings account for your emergency fund. This can be linked to your main bank account, or an entirely separate account designated for long-term savings only. It will most likely take you a mere 10 minutes to set this up, but will help you big-time in the long run.

FYI: I’ve found it most useful to create an emergency fund and then pretend it doesn’t exist. Conveniently forgetting the money is sitting in an account ups your odds of not touching it.

Drum Up “Use Rules” for Your Spends

It may be useful to think of your emergency fund as guarded by a prudent, stringent warden, who only permits you to access this special account for dire emergencies.

So what makes up this elitist squad of “VIP emergency scenarios?” Start by thinking about what truly constitutes an emergency. Is it governed by amount or cluster of circumstances? For instance, does an emergency has to be over $200 for it to be a true 911 situation? What kind of situations have cropped up in the past where cash could have saved the day?

In the past year I’ve had to tap into my e-fund to replace a laptop that died, purchase a new cell phone that suffered water damage, pay for moving expenses after being forced to relocate, and cover $1,500 in car repairs. Without a healthy rainy day fund, I’d be drowning.

Pay Yourself Forward

The best way to save is to pay yourself. Commit to setting aside a given amount for each paycheck. It doesn’t have to be a large amount. If you’re a Chime member, you can set up an automatic transfer each time you get paid. (FYI: You first need to establish direct deposit.) Even 10 percent adds up quickly over time. If your take-home pay is $1,000 for each bi-weekly paycheck, that’s $200 a month, or $2,400 a year. Not too shabby, right?

It’s All About Auto-Saving, Baby

This is a classic money tip, but I can’t stress enough how automating your goals can save your behind. You can read countless money blogs until the cows come to pasture. But IMHO, no matter how much knowledge you gather about financial wellness, auto-saving is the easiest thing you can do to help your emergency fund grow. The beauty of it? You only have to set it up once. Then you can blissfully forget about it. If you want to save $500 in three months’ time, auto-transfer $42 a week. Easy-peasy.

If you’re a Chime member, you can also round up transactions. Each round up amount can then be deposited right into your Savings Account.

Create Milestones

So, how much should you aim to save for your emergency fund? The more you can sock away, the better. But when you’ve got bills to pay and other money goals to juggle, it’s generally recommended to save three to six months worth of your living expenses.

No need to get overwhelmed. I say start small and create milestones along the way. A recent survey by EARN reveals that the average shortfall of cash in a given month is typically anywhere from $250 to $500. So start by committing to saving $250, then $500, $1,000, and so forth. Each time you hit one of these milestones, treat yourself. I’m all about feeling good about my money decisions, and rewarding myself with small, reasonable splurges (and I do mean small), when I hit every little goal.

Top It Off As Necessary

Once you saved enough for your emergency fund, give yourself a big pat on the back and do a happy dance. But you’ll also want to monitor it and make sure it stays in the flush. So let’s say you needed to take out $500 for some 911 dental work. Turn your auto-transfers back on, round up transactions, and set aside a portion from cash that may “fall into your lap,” such as work bonuses, tax refunds, and cash gifts.

Systems Override Habits

No doubt that being disciplined about your money is the key to financial health. But developing solid habits takes time — and a ton of effort. In fact, it typically takes 66 days to form a new habit. And just like I can easily cave in to a carb-loading binge, you may also lapse into old, unhealthy habits.

In my case, I rely on systems that I’ve set in place for my savings. For example, auto-saving and creating rules to bolster my emergency fund have come in handy. This way I don’t beat myself up if I choose to spend on other things. Instead, I set up auto-pay and pay myself first when I receive income . This helps me feel good about where my money is primarily going.

Ready to kick-start your emergency fund? You got this!

 

How to Be Prepared for a Market Downturn in 2019

If you had money invested in the stock market in 2018, you may be feeling a tad bit of anxiety. Well, maybe a whole lot of anxiety. That’s because last year was the worst year for stocks in a decade, with the S&P 500 down 6.2%, the Dow falling 5.6%, and the Nasdaq dropping four percent. Yikes.

As we move into 2019, you may be wondering if the stock market will continue to decline or whether it will rise. While no one has a crystal ball to see into the future, some financial experts believe a period of slowed economic growth is headed our way, according to Investor’s Business Daily. So, what can you do to prepare for a potential market downturn in 2019?

There are many steps you can take to protect your finances and stay ahead in the event that we head into a period of financial decline. Take a look at these four tips from financial experts:

1. Set expectations for your money

First things first: Figure out your money goals. For example, if you need cash for short-term goals, like living expenses and paying off debts, this money should ideally be held in an emergency fund or another savings account that isn’t subject to stock market fluctuations, says Ellen Duffy, CFP and owner of Parkway Wealth Management in Boston. Parkway’s services are provided through Aevitas Wealth Management, Inc., a registered investment advisor.

According to Duffy, you should keep three to six months worth of expenses in an emergency fund. This way the cash is available if you should need it for any unforeseen reason, like a job layoff or major car repairs.

Also, consider life cycle changes happening in your life now or in the near future. For example, are you expecting a baby, planning to buy a home or considering leaving your job to start a business? If these or other life changes are on your horizon, you’ll want to beef up your cash reserves – regardless of which direction the stock market goes.

“Understanding that you have ample cash on hand can a great tool for being patient during periods of market fluctuation,” says Duffy.

2. Understand that market fluctuation is part of investing

Here’s a fact: Market declines are part of investing.

“They occur regularly and are difficult to predict,” says Duffy.

So, why do we feel nervous and emotional when the stock market declines?

“Because we are human! It is natural to feel uneasy during periods of market volatility,” she says.

But, here’s the good news: Declines don’t last forever and generally speaking – while past performance does not predict the future – markets do go up over long periods of time  – “they just don’t go up in a straight line,” says Duffy.

The best thing you can do if you’re worried about the volatility of the stock market is to educate yourself on the fluctuations over time, prepare for this and ride it out. Remember: What goes down, will come back up.

According to Fidelity, it’s impossible to predict when the good and bad days will happen. If you miss even a few of the best days, it can have a lingering effect on your portfolio. For this reason, it’s best to stay the course. 

Adds Duffy, “try to avoid making emotional decisions or trying to time the market – both actions can be harmful to investment performance.”

Here’s another tip: A market decline can be a good time to add to your investments – that is, if you have ample cash on hand, are prepared to invest long-term, and can handle potential volatility. Think of this like getting a great deal on a vacation or new car.

“People love to buy clothes, cars, airline tickets etc. when they are available at a reduced price… yet this premise often doesn’t translate to some investors,” says Duffy.

When stock prices fall, this may benefit you as you may be able to buy more shares or spend less money per share. Case in point: The worst times to jump into the market may actually turn out to be the best. For example, the best 5-year return in the U.S. stock market began in May 1932—in the midst of the Great Depression, according to Fidelity.

3. Don’t put all your eggs in one basket

Ok, this may seem cliche but this major premise in investing is also called “diversification.”

“Downside risk and performance can be amplified if you are invested in a single asset class or single stock – also referred to as ‘concentrated position risk’,” says Duffy.

Instead, you should consider investing in multiple asset classes, including: large cap stocks,  growth or value stocks, and small cap stocks. You may also want to consider investing in international stocks, emerging markets, commodities, real estate, and multiple categories of fixed income securities.

“Each asset class has its own attributes and over time may outperform or underperform for any given period ..and no one particular asset class has been the top performer year over year.”

If this information seems too high-brow, let’s boil it down this way: Diversifying, or spreading your investments across various asset classes, may help lower the fluctuation in your portfolio. To create a diversified portfolio, it’s important that you also understand your risk tolerance, as well as your timeline and goals for investing.

4. Save money automatically

Regardless of whether you have a lot, a little or no money in the stock market, it’s important that you save money. This can help you during a time of financial uncertainty (see #1). It can also help you reach your financial goals regardless of whether the market goes up or down.

A good way to stash away more money is to automate your savings. If you open a no-fee Chime Bank account, you can start saving more money right away. How? You’ll get a Chime Visa Debit card and every time you use your card, Chime will round up your transaction to the nearest dollar and deposit that change into your Chime Savings Account. Those pennies add up – fast. For example, if you use your Chime card twice a day on average, you’ll save more than $300 a year – without even thinking about it.

Stay the course

We get it: A potential stock market downturn may cause you to feel stressed out. But, if you use the four tips above, you’ll be more apt to weather a financial storm.

With that in mind, here’s a final pro tip: If you want or need more expertise on how to best manage your money, it’s a wise idea to seek help from an investment professional or financial advisor. This way you’ll have an expert who can help guide you through market ups and downs, as well as help hold you accountable to your money goals.

 

20 Reddit Personal Finance Tips We Love

When it comes to personal finance advice, there’s so much information out there. It can be dizzying to sort through personal finance podcasts, books and blog posts. I mean, which personal finance experts should you trust? And where do you go for some easy-to-understand personal finance tips?

In comes Reddit.

Reddit’s user-generated content is free and can be a good source of information if you want to improve your financial situation.

The Best Financial Advice from Personal Finance Redditors

We’ve selected awesome financial advice from the Reddit subreddit r/personalfinance. We even scoured through posts and comments to find some gems to help you take action with your money. Are you ready? Take a look at these 20 financial tips from selected Redditors.

1. Save or pay off debt based on your situation – by Zambenis

Should you save or pay off debt? It’s an age-old question and the answer can vary. This Reddit user shares the nuance of the situation. If your job is secure and you have strong relationships, an emergency fund of up to three months can be a good start. This way you can  focus on repaying debt. If your employment situation is less stable, saving a larger emergency fund is a better option before going beast mode on your debt. So, build your emergency fund based on your situation and work toward getting out of debt.

2. Save and invest automatically – by flat_top

We love this post because we also believe in paying yourself first. Most people spend first and then feel like they have nothing to save. Here we are reminded that we should save and invest first, and then see how much we can spend on everything else. Automatically saving can help you do this. Using Chime, you can automatically save 10 percent every time you get paid. You can also round up your purchases so you’re saving every time you spend.

3. Budgeting can help you avoid credit card debt – by dajesus77

Have you ever checked your bank account and winced? Have you ever wondered just how much you charged on your credit card? Keeping yourself in the dark about spending can lead to debt. That’s why a budget is a perfect antidote to keep your spending in check and avoid credit card debt. To start, create a budget, track your expenses, and check your bank and credit card balances every day.

4. Not investing can cost you money due to inflation – by  GivemetheDetails

Let’s face it, investing is scary. There’s risk involved and so many factors outside of our control. But keeping all your money in cash and not investing anything is not the wisest choice. So, start by figuring out your risk tolerance and investing some of your money, while also keeping some of your money liquid in cash savings.

5. How to get a credit card with limited credit by BrunedockSaint

It’s a catch 22. To get approved for a credit card, you need to have credit history. But how can you build credit history if you’ve never had a credit card and no one will give you one with no credit? Here, the Reddit user shares his or her experience in banking and getting a credit card with limited credit. For starters, get a card from your bank, use a co-signer, get a store card, or even a secured card. The key is to repay your balance in full and on-time.

6. Advice on getting out of debt by PacificNorthLeft

Ready to get out of debt? It’s time to ditch those extra expenses (for now) and budget. Pick a debt repayment method, like the debt avalanche method where you focus on eliminating your high interest debt first. While paying off debt, you can still save for retirement, even if it’s a small amount. It all starts with saying goodbye to some expenses and having a plan.

7. Saving is only one part of the equation, focus on earning more too by – gregaustex

Personal finance advice tends to favor frugality. Save money! Ditch lattes! We dig frugality too, but it has a plateau. There’s a limit to how much you can cut back. This post reminds us of that and advises us to maximize our earnings too. So that means asking for that raise, earning more through side hustling, and starting that business. Saving is just one part of the equation — earning more is another part.

8. Best way to pay extra on a car loan by hrds21198

Do you have a car loan and want to pay it off fast? It’s best to call the company first. This Reddit post notes that sometimes extra payments are applied to interest and not the principal. To make sure your extra payments are going where you want them to, give the company a call and say you want to pay more toward your auto loan and you want it to go toward the principal balance.

9. Simple student loan advice by article4freeman

There’s so much student loan advice out there. Here we have simple advice. Save up a few months of expenses as a cushion, then pay off your student loans fast. After that, take the amount you put toward debt and save and invest it.

10. Start Investing in a 401(k) by KermitMadMan

You know you should be saving for retirement and one easy way to do that is through your 401(k). But how do you get started? First, make sure your emergency savings is covered. If your company has a 401(k) match, contribute enough to get the match. The key is to start somewhere and keep building.

11. Best financial tips to manage money and move out by mormengil

When you’re just getting started with adulting, managing your money can seem hard. How do you get started? How can you manage your money to move out of your parents house? This post gives a step-by-step guide on where to put extra savings and how you can manage your money and prepare to move out.

12. Fixed or variable interest rates by DaTower75

If you’re about to take out a loan, you probably will choose from a variable or fixed rate. Which one is better? Although variable rates may be lower, interest rates are likely to go up, so locking in a fixed rate can be a good option.

13. Create a “fun” savings account by Jrlutz31

Here’s some advice we can get behind. Create a “fun money” savings account! No more guilt about having fun. It’s in the budget. You have the cash. Start by saving automatically and setting some money aside specifically for F-U-N. Having fun with your money can help you enjoy life and may even help you stay on top of your other financial goals because you don’t feel deprived.

14. Getting out of overdraft fees by clearwaterrev

Overdraft fees suck. This post helps share how you can waive those pesky fees and get rid of them if you’re in this situation. You can also choose a bank like Chime which has absolutely no fees.

15. Know where your money goes and how to budget by tracking by xaradevir

Many of us have thought, “Where the heck did my money go?” It happens. This post reminds us to track, track, track. Track everything. Start by going through all your expenses over the past month. Write down ‘need’ or ‘want’ and evaluate where you can cut back. You can’t improve your financial situation unless you really know what’s going on with your money.

16.  Don’t try to time the stock market by KCPilot17

In this environment, people are starting to lose their minds over the stock market. Is another recession coming? What should you do? Keep it simple. Stay on course and don’t try to game the market. Think long-term, not short-term, and stick with the plan. Avoid emotional reactions to the market and know that the stock market can recover in time.

17. Building credit with credit cards the right way by owari69

Credit cards and building credit can be confusing. Yet, it’s fairly simple. Get a card and pay it back on time. Over time, your credit score will improve. It all starts with using credit responsibly. Pay off your balance in full by the due date. Keep your balances low. Only borrow what you need.

18.  Don’t take on debt just to build credit by JsLadder

So, you may need some type of credit to build credit. But you should never take on debt and pay interest just to build your credit. You don’t need to take out a car loan just to improve your credit. There are other ways to do this. For example, you can start with a secured credit card or only use your credit card for groceries and pay it in full.

19.  Max out retirement by the end of the year by acosmichippo

By the end of the year, there are ways to maximize your money. It’s the best time to max out your 401(k) contributions and HSA. This advice is simple and to the point.

20. Tips on how to get a raise by buyabighouse

As noted in another one of these Reddit tips, earning more is part of the financial equation. This can be done by asking for a raise. But, how do you that? Start by doing research on Glassdoor or Payscale to see what the market rate is for your position and your area. Keep tabs on your accomplishments and at the right time, talk to your supervisor about a raise. It can be uncomfortable but growth always is!

Get started

Read to improve your finances? You can start by checking out these 20 Reddit personal finance tips on everything from paying off your student loans, building your credit score and asking for a raise. What financial tips would you add?

 

 

The Important Relationship You Shouldn’t Overlook

Less than one-third of Americans feel confident in banks, according to a Gallup poll. This is about the same level of confidence Americans have in the criminal justice system or the presidency. Yikes.

If you’re wondering what’s to blame for this, you might consider the 2008 financial crisis, which was engineered by Wall Street. Or the cascade of bank scandals, which have besieged stalwarts like Wells Fargo and Citibank. Or the abundance of banking fees, which cost the average American $329 per year.

Rather than looking backwards, however, we’d prefer to focus on the future. We’d like to zero in on how Americans can change their relationships with banks. So, we’d like to start with a simple question: If your bank was a person, would you remain in your relationship?

Indeed, just like a bad boyfriend, a negative relationship with your bank can damage your entire perspective — and a good relationship can make everything better. Here’s how (and why) to ensure you and your bank fall into the latter category.

How Your Finances Affect Your Mental Health

While there’s no denying your finances have an impact on your psyche, a recent survey from Northwestern Mutual revealed just how much:

  • 25% of people feel anxiety about money “all the time” or “often.”
  • 44% call money their main stressor — more than their personal relationships (25%) or job (18%).

These statistics are not surprising, according to financial planner and money coach Debbie Sassen.

“Money management skills are something a lot of us are missing,” says Sassen.

“We didn’t learn them from our parents — it was a totally taboo topic of conversation — and we didn’t learn them in school… So from the outset, as adults, we feel vulnerable and intimidated about money,” she says.

With high fees, scandals and impersonal customer service, many of the big banks exasperate these feelings. “Generally and broadly, there’s a lack of trust among millennials in the financial industry, and it’s deserved,” financial planner Ariel Anderson told Fast Company.

“We constantly read headlines about the missteps of banks like Wells Fargo; we lived through the financial crisis,” states Anderson.

One such millennial is Valerie Stimac, a travel writer for Space Tourism Guide. At her traditional bank, she paid an estimated $7.95 per month to maintain her checking account.

“It felt like they were taking advantage of me, rather than providing a service. “It was frustrating to have a bank I felt like I couldn’t trust,” says Stimac.

It Doesn’t Have to Be This Way

One Gallup poll found that, at the least trusted bank, a mere 12% of customers strongly believed the company had their best interests at heart. At the most trusted bank, more than five times that number (64%) felt the same way.

Clearly, where you bank matters, and not all banks are built the same way. (Some never even charge fees.) Sassen, the financial coach, says a trustworthy bank “can be your friend” and “help you create a good safety cushion.”

In search of that “friend,” travel writer Stimac left her bank after more than a decade.

“Switching banks has been the best decision I’ve made,” she says.

“[Now] I trust my bank to look out for me as a customer — and to look out for my money, which is the foundation of my financial future.”

Stimac is far from alone when it comes to switching banks. Dan Pierson, founder of Bolt Travel, says he “got really tired of paying $12 a month for my checking account, then getting hit with $35 overdraft fees on $2.50 coffee purchases.”

So, after moving to a new city where his brick-and-mortar had no physical branches, Pierson switched to an online-only bank.

“My banking has been much simpler since moving online, and the customer service is significantly improved. It feels great to be backed by a bank that’s aligned with my financial goals,” he says.

Ready to Break Up With Your Bank?

Banking doesn’t have to be a miserable, fee-ridden chore. It can be free, and easy – and maybe even fun.

Obviously we’re biased, but we think Chime is all that — and more. By charging zero fees, offering early direct deposit, and encouraging automatic saving, we strive to overturn the negative experiences you may have had with other institutions.

We thrive off trust and transparency; on working with you, rather than against you. And we want you to like us as much as we like you.

In our opinion, that’s the way every relationship — whether it’s with a business or a human — should be. Don’t you agree?

 

How to Be Financially Productive in the Winter

If you live in many parts of the country, the winter seems to drag on. Instead of weekends at the beach or picnics in the park, you may be stuck inside, huddled in front of a fire and binging on yet another Netflix series.

But why not use these cold days to be financially productive? To help you figure out ways to improve your finances during the winter, take a look at these four tried-and-true tips.

1. Organize your taxes

Before you let out a long groan, we’re right there with you: Preparing your taxes is no fun. But, wouldn’t you rather be doing this now – when it’s dark by 6 pm and freezing outside – than in April when you could be having fun in the sun?

So, take the time now to organize your necessary tax forms, fill out a tax organizer, itemize any tax deductions, and figure out how much you can contribute to a retirement plan. If you have a salaried job and received a W-2 form, your tax prep may be pretty straightforward. But if you have a side hustle or are self-employed, your tax organization may take a bit longer. The key here is: Don’t wait until April 14 to file your taxes by the April 15 deadline. Besides, if you get ahead of the game, you can get your refund sooner.

Pro tip: Open a Chime bank account and get your tax refund via direct deposit. All you have to do is select “direct deposit” on your online tax return software and fill in your Chime Spending Account and routing number. As soon as your refund is automatically deposited into your account, you’ll receive a text alert and email from Chime. Cha-ching!

2. Audit your bank account and find ways to save

I don’t know about you, but I am much more eager to be out of the house when the weather is warm. So, what to do on a day when you just don’t feel like braving the harsh weather? Audit your bank account and see where you can save money. This way you’ll have more cash for a summer road trip, your emergency fund or your other savings goals.

Start by spending an hour on a cold winter day and looking through your monthly spending for the past three months (or elect to audit just the past month or some other time frame.) Take a close look at what you’re spending money on and where you’re spending it. Even if you think you know exactly how you spend your cash, you’ll be surprised by what you discover.

Here are a couple of examples of what I found on a recent bank account audit: My cable bill had crept up for the past three months, my spending on groceries seemed out of whack, and I still had my husband on my gym membership even though he never goes.

It was time to do something about this. So, I ended up switching from my cable provider to a fiber-optic network (long story short: we can’t cut the cable or fiber optic cord entirely because my husband won’t give up his local sports channels.) This will save us $50 a month right off the bat. Not only that but the new provider threw in a free year of Amazon Prime, Amazon Echo and two $50 Visa gift cards. Score!

As for the high grocery bills, I decided to try a meal delivery service with a discount code for $80 off the first month. I loved it so much much that I’m now paying the regular $55 a week for three meals a week. But, get this: I was spending $600 a month on groceries for my husband and I. That is now reduced to $250 a month. Add to that $220 per month for the meal service. This means our monthly grocery nut is now $470 a month, a $130 savings each month! Plus, cooking at home is now easier and more convenient, so we don’t order takeout or go out to dinner nearly as frequently. And you guessed it: This saves us even more money.

Lastly, I called my gym and removed my husband from my membership, saving me $30 a month. That’s what I call easy money in the bank.

The takeaway: You can find ways to save money on a cold winter day – simply by spending an hour auditing your bank account.

3. Budget better

Is your budget working for you? If not, don’t give up. There are lots of budgeting methods and the one you’re using now may not be a good fit for you.

What to do? Spend an afternoon researching different types of budgeting methods, including the 50/30/20 budget, the envelope method, and the zero-based budget. Figure out whether a different kind of budget would work better for your spending and savings habits. Factor in whether you need to save more money into an emergency fund or free up cash to pay down your debt. Think of this time of year as a great opportunity to dive in and make any necessary changes to your budgeting method.

4. Automate your savings

By now you’ve probably heard a thing or two about the benefits of automating. But are you taking advantage of this?

If not, sit down and implement simple financial changes that will allow you to automate your money, enabling you to save more cash without even thinking about it. For example, now may be a good time to switch to a bank that will help you level up your savings account. If you’re a Chime member, for instance, all of your purchases on your debit card can be rounded up to the nearest dollar. And this round up amount is then automatically deposited into your Savings account. On top of this, Chime will automatically deposit 10% of your paycheck into your Chime Savings account.

Chill out

We get it: Winter can be miserable. But instead of complaining about the weather, you can turn those cold, snowy days into financial opportunities. By following the four tips here, you’ll be able to get your tax refund sooner, create a budget that works, and find new ways to save money. And just think: Before you know it, you’ll be enjoying the spring with less financial stress!

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