5 Key Benefits of Incorporating Your Business

Becoming an entrepreneur is no easy feat. Deciding on the right legal structure for your business is a common challenge you might face.

So if you’re going to legitimize your business, which option should you choose? Sole proprietor, partnership, Limited Liability Company (LLC), or corporation? Here are 5 key benefits of incorporating your business and using it to boost your bottom line.

1. Personal Asset Protection

Unlike a sole proprietorship or partnership, a corporation is completely separate from its owners from a legal standpoint. This means that your personal liabilities and debts are separate from that of your business. This separation is key when protecting your own personal assets like your home, car, retirement account etc.

If in an extreme case, you’re unable to pay a business debt or someone sues your business, they won’t be able to seize your personal assets.

2. Tax Benefits

Certain tax benefits make corporations very appealing to entrepreneurs because self-employment taxes can be pretty brutal if you are operating as a sole proprietorship or even an LLC.

Generally, a corporation pays the standard corporate tax rate on its taxable income and the owners pay income tax on their personal earnings from the business. Yes, this is double taxation but it can be beneficial given the fact that only the owner(s)’ salary is subject to self-employment taxes instead of all your earnings.

If you can run a successful business and legally save on taxes, why wouldn’t you want to keep more of your hard earned money in your pocket?

3. Automatic Protection For Your Business Name

When you incorporate your business, the business name automatically becomes protected in the state you registered the company in. This means that no other company or LLC in the state that sells similar products or services can use the same name as your business.

If you want to protect your business name throughout the U.S. you must file a trademark, but incorporating your business is a good first start especially if you do a lot of local, in-state work.

4. Opportunity to Get Shareholders

One of the cool perks of having a corporation is that you can sell stock ownership of your company to raise money. This could be a nice alternative to taking out a loan to grow your business. With a C-corporation, you can have an unlimited number of shareholders

5. Instant Credibility

Finally, I’m going to be blunt and say that incorporating your business will most likely provide instant credibility which is what you want as you expand your operation.

When you take the time out to formally register your business, it can make finding prospective clients, customers, and vendors easier. Even if you’re great at what you do, it’s difficult to trust people these days and there are tons of scams out there that others want to avoid (rightfully so). You want to give the best first impression when you meet people and network.

Having a formal and organized business tells people that you care about your company and are serious about working with them in some capacity.

Summary

Incorporating your business is a big decision so it will require some thought, planning, and a discussion with your attorney and accountant if you think it’s necessary. If you do choose to move forward, you’ll need to make sure your business meets all the legal and financial requirements. Then, you can start filling out the registration paperwork.

 

5 Ways to Teach Your Kids Good Money Manners

As a parent, you’re responsible for teaching your children many important life-long lessons.

One of the most valuable lessons is this: how to use money responsibly. But, before you dive in, consider first that money is a taboo topic for many families. In fact, discussing money is often awkward.

At the same time, it’s imperative to put your apprehension aside and talk about money with your kids. Why? The sooner your kids understand the inner workings of your family’s finances, the sooner they’ll appreciate the value of money. In turn, you will be teaching them that’s it ok to talk about their own finances – and ask for help – as they grow up.

To help you successfully discuss money with your kids, take a page from our book with the following 5 suggestions:

Teach them about debt

Despite its ubiquitous place in modern American society, debt has an extremely negative connotation. People who carry debt are sometimes viewed as irresponsible with their money, even if they manage their debt payments comfortably.

To explain the role of debt in your overall financial picture, start by explaining some of the debts you’ve had or still have. For example, you can talk about the fact that you owe money on the car you drive to take your kids to school. Or, you can explain that your home is still technically owned by a bank.

As your kids approach the tween years, you can also talk to them about other forms of consumer debt, like credit cards and high-interest personal loans. Once they understand that using a plastic card is not akin to free money, they’ll have a better idea of why it’s important to spend responsibly. They’ll also understand that, if used right, debt can help improve your financial footing.

To put these principles into practice, consider lending your kids money to pay for something they want instead of simply buying it for them. When I was 14, for example, my dad loaned me $750 to help me buy a computer. It was my responsibility to pay him back, interest-free. I learned quickly that this debt meant I was beholden to someone else.

Be wise about giving allowances

Giving your kids allowances can help them learn the importance of work and the value of money. On the flipside, allowances can also cause problems down the road – especially if your kids grow up to expect free money.

Instead, help your kids understand why they are receiving an allowance in the amount you deem fair. Then, consider giving them household tasks to earn their allowance money. Lastly, talk to them about jobs you’ve held and how much you were paid. This way, your kids will appreciate the value of working hard to earn money.

And, here’s another pro tip: encourage your kids to save some of their allowance money. Not only does this teach them to use money prudently, but it can also prevent them from attempting to make frequent withdrawals from the Bank of Mom and Dad.

Include them in budget discussions

Your kids may not be pleased with all of your financial decisions. When I was in middle school, my dad hyped up a mysterious family vacation for months before it happened. We all thought it would be a blast to go to Disneyland or spend a week at the beach.

But, when the day arrived, my dad pulled into our driveway in an RV and told us we were going on a road trip through Wyoming and South Dakota. We all felt let down, and some of us, regrettably, complained about how lame the trip was going to be. Fortunately, we did end up having a great time.

Perhaps if we grumbled less and had been part of the planning process, we would not have had such high expectations. Clearly, my parents couldn’t afford the exotic or theme park-centric trips we all wanted.

Keep in mind, however, that involving your kids in the vacation planning experience doesn’t mean you have to show them your monthly budget. But, if you’re taking a vacation or considering a large purchase for the family, perhaps you can sit down all together and talk about how you plan to budget and save up for the purchase or trip.

Explain why

Kids typically ask the question “Why?” when they don’t get exactly what they want. In fact, you may hear them repeat this one word question over and over again in the same conversation. Responding with something like “Because I said so,” or “We can’t afford it” may shut down the conversation, but it isn’t the best way to address the issue.

Instead, try explaining the real reason why you’re not going to buy something they want. This can also be a good time to teach your children about budgeting and saving money.

Avoid net worth comparisons

It’s hard for kids to avoid comparing their house to their classmate’s. Likewise, older kids get caught up in comparing clothes or even cars.

But, you can help your kids avoid the comparison trap by steering clear of this yourself. If your kids catch you trying to keep up with the Joneses, they may start to equate financial success with social status.

Instead, teach your children why it’s important not to play this game. The earlier they understand that a person’s value extends far beyond their net worth, the more self-assured they will be later on in life.

 

This is How Your Financial Health Affects Your Physical Health

We all deal with financial pressure from time to time. Maintaining a budget and making sure that you’re saving money isn’t always easy. But when things start to feel dire, money problems can take a toll on your physical health.

In some situations, the ramifications are obvious. For example, if you can’t afford health insurance, you’re less likely to go to the doctor and this can exacerbate a medical issue. There are also a host of smaller ways that poor finances can affect your physical health. To better deal with your financial stress, it’s first important to recognize how this anxiety can affect you both mentally and physically.

Financial stress and the physical symptoms

According to Debt.org, the average college graduate has $37,172 in student loan debt. The stress that comes with this kind of debt burden is clear, with respondents to a survey by Student Loan Hero listing headaches, muscle tension, upset stomach and insomnia as symptoms. Other physical symptoms of stress include low energy, chest pain, nervousness and shaking, frequent sickness, and dry mouth.

Researchers have also found a link between financial problems and depression and anxiety. These conditions come with their own set of symptoms, including changes in appetite or weight, exhaustion or fatigue, an increased heart rate, restlessness, and sweating.

All of these symptoms can come and go, but if you feel them consistently, consider how your financial health may be impacting you. It may be time to do something about it.

Three ways to get your financial health under control

As with getting into better physical shape, improving your finances isn’t something you can do overnight. The key is to commit to financial wellness for the long-haul. Here are some tips to get started.

1.  Watch your spending

If you feel weighed down by debt, it’s time to take a look at how you spend your money to see if you can make some improvements to your habits.

For example, you can monitor how much you spend on dining out and hitting the bar with friends. You may also want to watch your other expenditures and see if you can trim the fat.

We’re not recommending that you stop spending entirely or deprive yourself of having fun, but taking stock of where you can cut back is the first step to tracking your money. Once you know what you’re spending on and where you need to rein it in, you can then take reasonable steps to start paying yourself first.

2. Boost your income

Getting a second job isn’t always the best way to relieve your stress. At the same time, earning more money to cover your expenses can provide financial relief.

To help make things less stressful, consider turning one of your hobbies into a side business. This way, you’re doing something you enjoy while earning money along the way. The only drawback to this option is that it may take longer to start seeing an income and you may need to invest some money upfront. Some other options that will result in immediate income without the need for start-up funds: Get a part-time job or take advantage of the gig economy. For example, perhaps you have a car and can drive for Uber or Lyft at night or on the weekends. Or, if you love dogs, maybe you can walk dogs for Wag! With a little research, there is no shortage of side gig opportunities.

3. Add some padding

For many people, the worst part about financial stress is the fear of the unknown. If something unexpected happens — say, your car breaks down or the water heater goes out — and you don’t have enough money to pay for it, it can lead to a myriad of other problems.

To avoid this scenario, make it your top priority to start an emergency fund. Even a small fund of $1,000 can make a big difference on a rainy day. And, the fact that you have that extra padding can help you sleep better at night.

Don’t worry if you can’t save a lot. Even if you can only save a few dollars a week, save it. Over time, this will add up and give you the extra cash you need.

Financial health is paramount

How you manage your money is critical to your physical and mental health. What’s more, the stress, anxiety and other byproducts of poor financial health can make it harder to improve your money situation.

Getting on the right track isn’t always easy, but these first steps may give you a little peace of mind as you work to improve your financial situation. Over time, you’ll hopefully feel less anxious and depressed. And, once you’re in a healthier place, you can then strive to achieve your long-term financial goals.

 

What is an Overdraft Fee and How Do I Avoid Them?

When you’re trying to get ahead with your finances, incurring unexpected banking fees can set you back.

For example, an overdraft fee is a common charge that many Americans experience without realizing it. And, if you’re not careful, these fees can add up quickly. In fact, customers who overdraft frequently can pay up to $450 in fees per year.

But what exactly is an overdraft fee and how can you avoid them?

What is an overdraft fee?

If you place a transaction that sends your bank account below $0, then one of two things will happen:

1. Your bank will decline the transaction for insufficient funds or
2. Your bank will put the transaction through. However, the service doesn’t come cheap. In this case, your bank will charge what is known as an overdraft fee for overdraft protection. In many cases, you may have opted-in for overdraft protection – without even knowing it.

Which transactions can trigger an overdraft fee?

There are four transactions that cause these fees:

  1. Checks and other transactions using your checking account number
  2. Recurring or automatic bill payments e.g. utility bills
  3. ATM transactions including withdrawals. If you opted for overdraft protection and withdraw more than you actually have in your account, you’ll be charged an overdraft fee.
  4. Debit card transactions including everyday purchases. One common debit card myth is that debit cards are free of fees. While it is true that with a debit card you won’t experience charges associated with credit cards like late payments, balance transfers, foreign transactions, cash advance or interest, there are still fees attached. These include service fees, daily balance fees, ATM charges, and of course, overdraft fees.

How much is an overdraft fee?

According to the Consumer Financial Protection Bureau, most financial institutions charge about $34 per transaction for overdrafts. The term per transaction is important here.

A few years ago, I incurred $120 in overdraft fees in a single day. Because all my purchases “went through,” I was clueless until about 12 hours later when I checked my mobile banking app. Interestingly, looking back at the statements now, one of the purchases I made was less than $10! Yet, the bank charged me $30 due to insufficient funds. It was a hard lesson to learn.

That particular bank limited the number of transactions that they overdraft per day. Others will charge an extended overdraft fee if your account remains overdrawn for a certain number of days.

How to avoid an overdraft fee

Experiencing overdraft fees is not only costly, but it’s also frustrating as it’s your job to get your account back in good standing. Here are several tips to avoid overdraft fees altogether.

Read the fine print.

Before you choose a bank account, it’s important to check the bank’s terms and conditions, especially when it comes to fees. While banks are no longer allowed to automatically charge overdraft fees without your consent, it’s easy to opt-in for overdraft protection without realizing it. It’s advisable to not get caught off guard with “protection” you may not need.

Personally, I would have preferred a declined transaction to alert me to the fact that my account dipped below zero. Instead, the blissful ignorance of overdraft protection ended up being stressful and took almost an hour to resolve on the phone.

Switch to a fee-free bank account.

The best way to avoid hidden fees altogether is to switch to a bank account with no fees like Chime. With Chime, you don’t have to worry about incurring fees for non-sufficient funds. Instead, any payments or withdrawals that would result in a negative balance are rejected.

As you can see, the less you have to worry about fees, the more you can focus on building the lifestyle of your dreams. Are you ready to take charge of your finances and stop paying overdraft fees?

Don’t be afraid to ask your bank to waive the fees.

If you were recently charged an overdraft fee, don’t be afraid to ask the bank to waive it. If you’re a “first time offender” like I was, your bank should be able to waive the fees within a few business days.

Get paid earlier with direct deposit.

One reason that people experience overdraft charges is that they don’t get paid quickly enough. You may even still deposit paper checks and wait for the checks to clear before you see your money. Both of these scenarios can inhibit your ability to budget and can lead to overdraft fees.

With Chime’s Early Direct Deposit feature, you can get paid up to two days earlier than traditional banks. Your money is available when your employer sends the funds, giving you peace of mind.

Check your balances regularly. 

One major issue I have with large banks is that it takes time for transactions to update in the mobile banking app. Choosing an innovative bank account like Chime, however, speeds up the transaction process. Chime provides you with real-time alerts for each transaction, allowing you to stay on top of your finances.

Double-check your budget.

If your account is going into overdraft regularly, it may be time to evaluate whether this is highlighting an issue such as overspending. In some cases, it can mean that it’s time to tighten the purse strings and go on a spending diet. You can also consider looking into budgeting apps to get some extra support.

Build up your emergency fund.

Some people end up overdrafting when an emergency pops up. However, as a reminder, having overdraft protection is not the same as having an emergency fund. When an unexpected expense occurs, the last thing you’ll want to do is shell out money for banking fees.

How much should you set aside? A good rule of thumb is to save three to six months of living expenses in your emergency fund. Your fund should also be kept separate from your regular checking and savings accounts.

 

 

This is Why an Online Bank Account is Better Than Traditional Banking

After a hectic day, the last thing you want to do is stand in line trying to get your banking done.

Yet, with the rise of online banking, waiting in line doesn’t have to be an issue anymore. Now you can do your banking without even leaving home. Online banking is not only more convenient, but gives you the ability to save money, time, and even the planet.

Keep reading to learn more about why online banking is better than traditional banking.

Online Banks Have Lower Fees

Brick and mortar banks have enormous operational expenses that online banks simply don’t have. For example, they need specialized buildings to secure your money, state-of-the-art technology and equipment, and a large staff. They’re in the business to make money, not just store yours. That means fees go up when the bank’s expenses go up. With online banking, fees are kept to a minimum because the bank’s expenses are kept in check.

It’s Easier to Access Your Online Bank

Traditional banking hours aren’t always convenient. For some of us, getting to the bank before closing means leaving work early. It can also mean fighting traffic in the middle of the day, taking time off work, and waiting in long lines. If you do your banking online, there is no traffic and no banking hours. Yes, you may end up on hold waiting to talk to a customer service representative, but at least you can get stuff done while you wait.

Easy Deposits via an App

Most banks will let you make your deposits through one of their many ATMs. But what if you’re not near one of these cash machines? With online banking, making a deposit is as easy as snapping a picture and uploading it to an app. No added stops and no worries about leaving your deposit in an ATM all night (and hoping it’s picked up in the morning). But, if you really want to go to an ATM, most online bank accounts now offer access to a broad ATM network. Chime, for example, allows its members to use more than 30,000 ATM locations nationwide – for free.

Saving Money Can be Automatic

With online banking, saving has never been more simple. For example, you can set up automatic transfers to move money from a checking account into your savings. You can even start small by having Chime round up each transaction made with your Chime debit card. The rounded up amount will be automatically deposited into your savings account. If you want to take your savings efforts further, you can automatically move 10 percent of your paycheck into your savings account each time you get your paycheck. This way your savings is funded with very little effort.

Experience Exceptional Customer Service

Because there are no buildings to staff and maintain, digital banks can often dedicate more resources to their customer service department. When you have questions or concerns, you just have to call. With customers all over the US (or perhaps even the world), the customer service departments at online banks are usually available outside regular business hours. Plus, if you don’t want to pick up the phone, most online banks offer chat features online or via an app.

Do Your Banking Online Because it’s Right for You

Online banking is a great tool. But remember, before you make the switch to an online bank, look at your own banking habits and determine if it is the right move.

Here are some questions you may want to ask yourself when determining if online banking is the best fit you:

  • Do you like going into a branch and talking with your banker or the tellers? If so, you may want to stick with a brick-and-mortar bank.
  • Is it a pain in the neck to get to the bank? If so, an online bank may be your best bet.
  • Do you have complex interactions that are easier done in person? If yes, you may be better off with your current physical bank branch.

As you can see, it’s up to you to decide what type of banking is best. Just keep in mind that if you’re looking for convenience and lower costs, you may want to keep your bank in your pocket.

 

How to Prioritize and Reach Your Savings Goals

Saving money is one of the most basic personal finance recommendations you’ll ever get. But it’s not always easy to know where to start. For example, how much should you save for emergencies and what other things should you be saving for?

To be more effective with your savings, it’s important to have specific goals for your money. The following 5 steps can help you establish and prioritize those goals.

1. Write down your goals

Everyone has different savings goals, so it’s important to identify yours. In addition to saving for emergencies, you may have both short-, mid- and long-term savings goals. Here are just a few examples:

  • Retirement
  • College expenses
  • Vacation
  • Home or car down payment
  • Home remodel
  • Other large purchases

Whatever your goals are, write them down. If possible, assign a dollar amount and timeline to each goal. Doing this not only gives your goals legitimacy, but it also gives you a deadline.

2. Put goals in order of importance and urgency

Once you have all your goals on paper, separate them into the following groups:

  1. Urgent and important
  2. Important but not urgent
  3. Less important and not urgent at all

For example, an emergency fund would fall under urgent and important because you never know when you’ll need it. If you’re planning to buy a house this year, a home down payment might also fall in that group.

On the other hand, if you’re 28 years old, retirement might fall under the second group as you’ve got a long way to go before you hit your 60s or 70s.

Lastly, the third group would largely contain other things on your wish list that aren’t necessary to your financial well-being. For example, a boat, a vacation or a new car if your current one is working just fine.

Of course, there’s no hard-and-fast rule for how to determine which goal goes where. The above examples are just that — examples. You determine the priority for each goal depending on your own personal preferences and needs.

3. Get the right accounts

Putting all of your savings into one account is ineffective, especially for long-term goals. While an emergency fund is best kept in a savings account, retirement savings belong in a 401(k), IRA, or other retirement-specific account.

For each goal, determine which accounts would work best for your needs. If you’re not sure, do some research online to see what options are available.

4. Break down your goals into a monthly savings plan

Since you’ve already assigned each goal a dollar amount and a deadline, you can now easily break them down into digestible chunks. For example, say you have the following goals:

  • Vacation: $2,400, 12 months
  • Emergency fund: $4,800, 24 months
  • Down payment: $10,800, 36 months

To reach those goals by their deadlines, you’d need to save the following amounts for each:

  • Vacation: $200 per month
  • Emergency fund: $200 per month
  • Down payment: $300 per month

If you can afford to save $700 per month for these goals, set up an automatic transfer from checking to savings each month to make sure you don’t forget. If you can’t afford it, consider adjusting your goals to fit within your budget.

To supplement your savings plan, consider using an account that offers automatic savings features, like the Chime Visa® Debit Card. Simply use your card for everyday purchases, and Chime will round up each transaction to the nearest dollar, transferring the round-up amount to your Chime Savings account.

5. Keep track of your progress

It’s one thing to set goals, but another to achieve them. In addition to creating and executing your savings plan, it’s critical to periodically assess how you’re doing.

Keeping track of your progress can help you recognize that you are perhaps spreading yourself too thin or maybe you can even save more.

To help you monitor your progress, you can use a money management tool like Mint. When you connect your Chime savings accounts with Mint, you’ll get real-time updates as your accounts grow. Mint also allows you to set and track financial goals, making the whole process easier.

The best time to start saving is now

If you’re not currently saving much money, it can be overwhelming to think about saving for multiple goals. Avoid getting paralyzed by focusing on what you can do now, regardless of how much or little it is.

In the meantime, find ways to trim your budget to make room for more savings. Also, look for ways to earn more money either through your current job or on the side. Over time, you’ll find that it gets easier to set aside money for things that are important to you. And, your future self will thank you for your efforts.

 

It’s All Greek to Me: Money Lessons from Ancient Greece

Much of the modern world traces its roots to the city-states of Ancient Greece. Democracy, philosophy, geometry and the medical profession all descend from the land of Aristotle and Achilles. Our sports are born of the Olympics, our military owes its power to the phalanx, our movies and novels are re-imaginings of Hellenic myths and plays.

But personal finance?

What in the world might Homer, Hercules, Helen and the rest have to say about the way we should handle money in the modern era?

Quite a bit, actually.

And the best way to learn those lessons is to start at the top … by looking to the gods.

Do the hustle

When the ancient Greeks turned their attention to the gods, demigods and other deities of Mount Olympus, they saw a world much like their own — marked by rivalry, love, violence, deceit, ego, and danger. And of all the gods, only one seemed to be willing to take the side of mere mortals in the earthly battles centered on money: Hermes.

Most of us would recognize a statue of Hermes, the good-looking young male dressed in winged sandals. (The Romans called him Mercury — money lessons from them right here.) But the modern world has forgotten the lessons of the fast-moving god.

Hermes was the gods’ messenger and a noted trickster. Stories of Hermes tell the tale of a deity interested in helping humans by deceiving other gods. And humans who absorbed those lessons learned that deceit was a powerful tool endorsed by the heavens.

No Wall Street mogul would be surprised to learn the trickster was the patron god of trade and commerce. And no grifter or pickpocket would be surprised to learn that Hermes the hustler was also the patron god of thieves.

What sort of world gives birth to a mythology that unites trickery and crime with business and trade?

A place where life is never easy, and playing by the rules is a recipe for stagnation.

Ancient Greece was the birthplace of rugged individualism … and with good reason. Across the hundreds of city-states spread throughout the Greek world, most wealth was held by a small land-owning aristocracy. Prior to the rise of democracy in roughly 500 B.C., Greece was a place that was very tough on the little guy.

And the usual way of making it in ancient cultures — small-scale farming — didn’t work very well on the rocky, hard-to-farm lands of Greece.

“You couldn’t really do agriculture in Ancient Greece,” according to journalist and author Will Storr, whose book “Selfie: How We Became So Self-Obsessed and What It’s Doing to Us,” says the roots of the modern world’s striving, vain culture can be found in the lands around Olympus. “To get along and get ahead in Ancient Greece you had to be this self-starter. You had to be making olive oil and trading it or fishing and selling your fish.”

No ancient culture loved the hustle as much as Greece did. The stories of cutting corners, misleading enemies, wearing disguises, hiding true intent, sneaking around and stealing things are rampant in Greek literature and mythology.

The 12 Labors of Hercules are a series of challenges that often revolve around pilfering things of value and finding tricky and easy ways to take on difficult tasks. Homer’s The Iliad tells the tale of a city destroyed by Greek soldiers who hid inside a fake horse.

Every modern personal-finance success story that began with a person refusing to accept their financial fate can be traced to the hustler god.

Get out of debt

In the modern world, we know all too well the worst corner to cut in finance involves debt. The temptation to borrow our way out of trouble is great. And our culture of easy credit makes it painfully simple for someone to slip into debt.

The ancient Greeks found themselves on that same slippery slope. And it took a legendary leader to get them back to solvency.

In the 6th century B.C., the people of Athens found themselves in over their heads. Primitive credit markets had emerged in which people farmed the land of the rich in exchange for a share of the crop.

But under the onerous terms imposed by the aristocracy, debtors who could not pay their debts could be enslaved. In some cases, Athenians sold themselves into slavery in order to free their families from such debt.

The situation could not hold. Lives were destroyed. And revolution loomed.

But the Greeks found an unlikely hero in an Athenian administrator named Solon.

Tasked with solving the problem, Solon reorganized all of the Athenian society.

Debts were reduced, the currency was revalued, and the Athenian class system was restructured into four distinct groups in an effort to lessen the aristocracy’s chokehold on land ownership.

Ask the experts

Solon’s solutions saved Athens.

But not forever.

New crises emerged, many of them tied to the city state’s finances. And by the fourth century B.C., the people of Athens decided that direct democracy, i.e., the people vote on everything, wasn’t working for fiscal issues.

So Athens moved toward a more republican structure for finance — electing financial officers to oversee the money and decide on spending.

The new system worked well. By the middle of the third century B.C., Athens had become the richest city on the Mediterranean.

And more importantly, the professional class of finance officers ensured the city-state stayed prepared for tough times. Even during times of peace, Athens spent more of its public funds on defense than on all other public spending combined.

It’s been centuries since Greece was the center of the world. And today that nation, home to a seemingly endless debt crisis, hardly seems the place to turn to for financial wisdom.

But it would be a mistake to forget it was the ancient Greeks that taught us the three core lessons of personal finance: learn to hustle, stay out of debt and ask an expert for advice.


This article originally appeared on PolicyGenius.

 

What is an EMV Chip Card and How Secure are They?

When was the last time you actually swiped the stripe on your credit or debit card during a transaction? If it’s been a year or so, the timing sounds right.

Over the past 12 months, there’s been a huge technological shift from mag-stripe cards to those enabled with chips. In fact, chip-enabled cards represent more than 600 million cards in the U.S. alone. In spite of retailers in the U.S. being slow to embrace the new technology (in Europe and other parts of the world, retailers have by and large already adopted chip cards), you’ve likely seen merchants upgrading or replacing payment terminals to accept chip cards. While this takes place, magnetic stripes will continue to go the way of the dodo. Even if your old card hasn’t expired yet, your bank has probably already provided you with a chip-based replacement.

This migration to chips cards, also known in the industry as EMV (Europay, MasterCard, Visa) credit cards, is accompanied by a swirl of hype. For example, EMV providers commonly state that your transactions are more secure, resistant to hackers, and foolproof to fraud. About now you may be wondering: How does that little microchip inside your card provide you with these safety measures?

Read on to learn more about the EMV cards and how you can protect your money.

A primer on card technology

Magnetic stripe technology is actually quite archaic. It dates back about 50 years and utilizes the same analog format as an old cassette tape. It’s literally magnetized and matched to your bank account information. This data, embedded on a simple mag stripe, is consistent and therefore never changes.

So, anytime you go to swipe a stripe-equipped card, it reads the same data over and over again. And this consistent information is vulnerable to fraudulent activity because thieves can decode the magnetic field and duplicate your bank information. In fact, fraudsters commonly use credit card skimmers at ATMs and other locations to glean your personal information. Stopping fraud meant canceling your old card and getting a new one with new information. Unfortunately, your new card included the same stripe technology and it was therefore just as sensitive to theft as it was before.

By contrast, the computer chip on an EMV card is where your banking information is stored, and the chip is always changing up the data on your card. For example, you may have a card number that stays the same, but the information embedded on the chip is constantly being scrambled and encrypted. In short, your card’s chip contains a special microprocessor that creates a code for every transaction, no matter the amount.

So, when you insert your card into a physical payment terminal or when you’re shopping online, the computer chip communicates with the merchant and unscrambles the coded language. Your  payment information is then obtained using one of a few different types of authentication methods:

  • Static Data Authentication (SDA)
  • Dynamic Data Authentication (DDA)
  • Combined DDA with application cryptogram generation (CDA)

The EMV chip also ensures that both the transaction and the cardholder are verifiable (before the days of EMV cards, you’d accomplish this by entering your PIN number and card’s security code).

Essentially, your EMV card contains the exact same information as your old mag stripe card, but because the chip inside is always generating new coded information, it has an extra layer of protection that magnetic stripe technology fails to offer.

For example, if a thief gets his hands on your EMV card, he will have a tough time using it. Not only is it difficult to obtain the computer chip from your card (equipment to do this can cost upwards of $1 million), but the advanced encryption would make it nearly impossible to decipher your banking information. Even if your card number was stolen, and not your actual card, the would-be fraudster wouldn’t be able to use it because EMV chip technology prevents the number from being replicated and repeated. On top of this, a payment terminal won’t recognize the number and the transaction will be declined.

Follow these EMV chip safety tips

Although EMV technology makes banking more secure, identity thieves have become more sophisticated and will always try to find ways to access your money. Your Chime debit card, for instance, is chip-enabled, but you should still take precautions to protect your finances, pay safely and avoid getting scammed. Take a look at some ways to keep your money safe:

  • Guard your digits: At an ATM, the supermarket, the mall, or when using your laptop in a public space, never divulge your card or PIN numbers to anyone. Fraud can still occur, so if possible, opt to sign for a transaction instead of using your PIN. If a fake transaction occurs, the liability falls back on the issuing bank, or on the merchant if the business is not equipped to handle EMV transactions. Some cards have even done away with PIN numbers and employ a chip plus signature method. (Neither Chime or another bank will ever ask you to reveal your PIN number.)
  • Keep track of your bank statements: Banks are more vigilant today to stopping theft and may even intercept fraudulent activity before it happens. My bank, for example, recently notified me that there was an attempted unauthorized use of my debit card – before a transaction was made. But, thanks to my EMV card, the fraudster couldn’t use my card number, and the bank recognized that I wasn’t the one using the card. The moral here: Stay on top of your monthly bank statements and look for transactions, debits or withdrawals that don’t look familiar. If you spot anything suspicious, report it to your financial institution.
  • Opt for mobile payments: Chime’s spending and automatic savings accounts are just two ways to maximize your mobile banking experience without the need to use a physical debit card. To ensure your safety, you can also look for retailers and vendors with mobile payment technology as this lowers the risk of your information being captured. Adding your debit and credit cards to your phone and using mobile-enabled terminals can also help ensure a secure shopping experience.
 

Financial Advisor Reveals Top 8 Money Myths (So You Can Avoid Them!)

 When it comes to figuring out your finances, it’s easy to get led astray. There are so many pervasive myths about money, debt, investing and more. How should you even begin?

Darla Pellersels, a long time financial advisor and president of Prosperity Financial Associates in Henderson, Nevada, says it’s important to educate yourself about finances and start taking control of your money right now.

“I would encourage everyone to read, reach out to an investment professional, take a class, and gather facts on investing, finances, budgeting, life insurance, and debt reductions strategies,” says Pellersels.

To help you manage your money, Pellersels debunks 8 common money myths that you may find yourself believing. Take a look.

MYTH #1: My student loan is deferred and not gaining interest.

Oftentimes this isn’t true. Check out the conditions of your loan and read every bit of paperwork. In many cases, the specifics of your loan are stated quite clearly on the invoice or statement.

MYTH #2: I don’t need life insurance because I will be dead, so why should I care?

This is a common myth that many people buy into. Although you may not need the insurance money after you pass away, a lack of insurance can leave your grieving spouse in a terrible financial bind. And, in some states, your loved ones can inherit your debt – leaving them in dire financial straits. You have insurance on your cell phone…why not your life! There are some insurance products that can also pay you for chronic, critical and even terminal illnesses. It’s worth your time to research and buy the best life insurance policy for you.

MYTH #3: You have to be rich to invest.

This is flat-out, not true. In fact, you don’t even have to be wealthy to hire a financial advisor. There are plenty of advisers out there that will help you invest with a small minimal investment and low to no fees. Pellersels says she has many clients that can only invest a small amount monthly or annually. If you start early, a small amount can change your retirement picture down the road.

MYTH #4: If a financial advisor controls my money, I don’t need to know how to invest. That’s why there are professionals.

Here’s the bottom line: it’s your money and your retirement! You need to know where your money is invested at all times. You should always ask about your investments, especially when weighing risk against benefits and volatility.

MYTH #5: I have to wait until I am 65 to retire.

Many folks believe that there’s a mandatory retirement age but this just isn’t true. You can retire at any age or time you want. Regardless of when you plan to retire, it’s important that you work toward getting out of debt, invest as much as you can into a retirement account, and save money to prepare to live out the rest of your years.

MYTH #6: It’s too late for me to gain control of my finances. I’m in my 50’s or 60’s.

If you are still breathing and working, you can get started! You can pay off your recurring monthly debt, save up for emergencies, and sock money away for retirement. With dedication, a strong monthly budget, and a will to make it happen, you’ll hopefully be able to plan for a comfortable retirement.

MYTH #7: I will always have a car payment or house payment.

Believe it or not, there is nothing that says these things are forever. You don’t have to have a car payment or house payment. There are many people out there that pay cash for slightly used cars. There are even people that have paid off their home mortgage early. To pay off your car or home loan sooner, you may want to consider earmarking extra money toward your monthly payments. This will not only help you hit your goals earlier, but you’ll also end up paying less interest.

MYTH #8: Credit Cards are great for emergencies.

Wrong. Cash is great for emergencies! If you use a credit card to cover an emergency and it lasts longer than anticipated, you have only dug yourself into a deeper debt hole. Losing a job, medical issues or even accidents can set you back significantly. This is what an emergency fund is for.

Seek Out Expert Advice to Discern Fact From Fiction

Speaking with a good financial advisor can help set you up for financial success. The key is to find someone who is ready and willing to answer all your questions in a way that helps you understand and take control of your money. Are you ready to bust some money myths?

 

How Do Banks Make Money?

“How do banks make money?” may seem like an unorthodox question to ask. After all, when your bank looks like Fort Knox on the outside and the U.S. Treasury on the inside, it seems like it must be making money. Right?

The truth is: most of us have no idea how banks really make a profit. When you consider the fact that a bank holds onto your money – and that of other customers – how do banks actually afford to keep the lights on, remain in business and turn a profit?

Here’s a 101 primer on how banks make money by earning money from your money. Yup – a mouthful. Read on to learn more.

Banks leverage your deposits

When you open a savings or checking account at a bank, your money doesn’t just sit there.

Every time you make a deposit, your bank “borrows” the money from you to lend it out to others. Think about all those auto and personal loans, mortgages and even bank lines of credit. The money doesn’t just appear out of thin air. Your money is helping fund these loans. The interest your bank generates on loans pays for their operating expenses. In turn, you get paid back in the form of interest – sort of a courtesy for trusting that financial institution with your money.

If you belong to a credit union that isn’t motivated by profit margins, you may see more interest paid to you. Or, in the case of an online bank account, there are no branch locations and minimal overhead costs. This means that you may see more money in the way of automatic savings and other perks.

If you’re on the borrowing side, banks lend money to you and receive extra interest when you repay the loan. In these instances, banks are careful not to pay out more interest on deposits than they earn – as this guarantees revenue. For example, the average annual percentage yield on a savings account is 0.06%; but on a mortgage loan or credit card, the annual percentage rate can stretch into the double digits.

At this point you might be wondering: how can money in the bank be loaned out and available to withdraw at the same time? Don’t worry. Your money hasn’t vanished on you. Banks don’t lend out all the money they have on deposit. They’re required to keep enough money on hand to handle transactions and withdrawals. Your funds are also protected and insured by the Federal Deposit Insurance Corporation.

Banks sell defaulted assets

A common banking practice is to sell or auction off items put up as collateral on defaulted loans. This may be a house that’s been foreclosed on or a car that’s been repossessed. So, where does the unclaimed collateral go?

You guessed it. The money garnered from the sale or resale of the items is funneled back into the bank’s budget.

Banks charge merchants transaction fees

If you use your debit card to make a $20 transaction, $20 is withdrawn from your bank account. But that’s on your end. Merchants, on the other hand, are typically charged a transaction fee by both your bank (the card issuer) and the merchant’s bank for electronic payments. This is yet another way for financial institutions to make money.

These processing fees — often called interchange fees — are charged to merchants to cover the interest banks may lose during the window of time called customer grace periods. Transaction and interchange fees can vary from bank to bank and card to card. On average, it’s a percentage of the actual transaction price, plus a small set fee. These fees, in turn, can add up to a mighty fortune for banks.

Interchange fees are also a way your bank/card issuer can afford to come up with the money to pay out credit card rewards, like cash back.

Banks charge you fees

One more obvious way banks make money is by levying fees on their customers. If you’ve dealt with certain big-name banks, you may be well acquainted with unwelcome surcharges. The worst part, unfortunately, is that you may have paid fees you’re unaware of.

Oftentimes, for example, banks charge account maintenance fees or penalty fees if your monthly balance falls under a specified amount. Fees are attached to everything from account transfers to canceled checks. And, of course, there’s the dreaded overdraft fee for those times you might try to spend more money than you have in your account. In fact, in 2016 banks made more than $6.4 billion in ATM and overdraft fees alone.

For more secure deposit accounts, like CDs, you may be in danger of being hit with fees for early withdrawal of funds. And, depending on the type of credit card you have, you may be responsible for an annual card fee, and that’s not counting late fees or inflated interest rates if you carry a balance from month-to-month.

Brick-and-mortar banks may also charge teller fees, fees to obtain bank statements, vault and safety deposit box fees, and other application and loan fees.

This may seem like too many fees to handle, but remember, not all banks are fee driven.

A winning proposition

As you’ve now learned, banks make their money in many ways. However, keep in mind that banks are also in the business of making you money. When you help them make money, they can help you achieve the same. And this becomes a win-win for all.