How can I successfully achieve my goals?

Creating a savings goal is commonly confused with creating a dream. For example, when asked to create a savings goal for a vacation trip or a car, their response is “I want to go to [location]” and “I want to have a [car model]”. This only represents what individuals want (a dream) without creating a reasonable process (savings goal) to achieve the end product.

That being said, we peer educators at the Financial Wellness Extension advocate, within our budgeting presentation, S.M.A.R.T. Goals. When creating a savings goal, it is important that you incorporate all 5 of these components: Specific, Measurable, Agreed Upon, Realistic, and Timely.

Specific: Making your goal well defined where it can be clear to anyone who has a basic knowledge of your project

Measurable: Creating an easy way to keep track of your goals that allow it to be motivational to achieve

Agreed Upon: In cases when your goal involves others, collaborate and make sure that everyone acknowledges the goal

Realistic: This allows your goal to be results-oriented and reasonable seeming accomplishment is within sight

Timely: Create a timeline when this goal will be achieved. Being able to track your progress encourages you to continue and see that the effort is effective

Written by Rex Wang, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

Reviewed by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension.

What kind of checking account is best for me: banks vs credit unions?

When it comes to choosing a checking account, it can be rather confusing. For example, different types of banks, offering different deals, with different fees all while requiring you to know what they’re talking about. To make things easier, let’s start with the basics: the differences between a credit union and a bank. Both of these financial institutions offer a variety of services, including a checking account, which essentially works the same way; the institution stores your money and you are able to withdraw it anytime you need. However, credit unions tend to be smaller, local and more focused on customer service while larger retail banks may be easier to become a member as well as have a wider variety of customer resources.

Let’s start by looking at credit unions, shall we? A credit union is unique in that the customers are the owners; anyone who chooses to utilize a credit union’s services can provide input into the union’s management and investment plan. These businesses are non-for-profit organizations and therefore do not work to provide an end of the year profit. However, credit unions are very selective on who may join. Often times a credit union is created to service members of a local community or business. Some, but not all, credit unions are part of the shared branching network, which means that you’re able to withdraw money from any credit union that is a member across the country! Credit unions typically have low maintenance fees for using their services, such as online banking, which is great if you’re still looking into starting that checking account! Overall, a credit union is a great option, but you may have trouble finding a credit union willing to let you bank with them. Search your local community to see if there are any in which you could join.

Next we will look into retail banks. Now there are several different types of banks, however as a college student you’re probably just focused on a personal checking account therefore you need to find a retail bank! Joining a bank is relatively simple; they have fewer limitations than credit unions and are often eager to help students. Large retail banks often have an extremely wide variety of banking options to better suit individual needs; this could include automated spending tracking or monthly rewards for spending money on certain items. However, retail banks may charge relatively high maintenance fees on your checking account for online banking or maintain a minimum account balance, which for many college students can cause a considerable dent in their monthly income. Luckily, banking with a national financial institution allows greater accessibility to your money while traveling.

Now that you know the difference between credit unions and banks, check out our Choosing a Checking Account comparison chart. Regardless of what sort of financial institution you decide to open a checking account with, be sure to check if they have a daily or monthly spending limit and think about what sort of services fit your needs the best.

 

Written by: Rachel Richardson, Financial Wellness Peer Educator.

Reviewed by: Kathy Sweedler, University of Illinois Extension-Consumer Economics Educator.

What is the Difference between a Credit Score and a Credit Report?

Many people use the term credit score and credit report interchangeably. Although mistaking them may seem harmless, credit scores and credit reports are very different. As stated in the name, your credit score is exactly that, a score. This score is a numerical value that is calculated and used by lenders to determine the risk associated with giving a borrower a loan.

The formula most often used to calculate a credit score takes into account a person’s payment history, amount owed, length of credit history, new credit and type of credit used. A person may receive a different credit score from each lender or reporting agency because the formula used to calculate the credit score will vary. The reason for the variance is because there are different types of credit score scoring models such as FICO, the most commonly used right now, and VantageScore, which both lenders and consumers are starting to use more often.

On the other hand, a credit report is a report of a person’s credit history. A credit report will include information such as a person’s social security number, current and previous addresses, and employment history. Besides this, a person can find a list of their lines of credit such as credit cards, student loans and mortgages, the date each one was opened, credit limits, and whether their accounts are past due or in good standing. Bankruptcies will also appear on someone’s credit report as well as the names of companies that have recently asked to see the person’s credit report.

Overall, it is also important to check your credit score in order to know where you stand, credit wise, and to be prepared for any outcomes on your credit applications. It is also important to remember to check your credit report to catch identity theft. A person should also check the credit reports from all three credit bureaus to ensure that all three credit bureaus have accurate information. As stated earlier, a credit score and a credit report are not the same thing, but they are closely related. The reason for this is because the information on a credit report is used in the calculation of a credit score.

Written by: Lesly Luna, Financial Wellness Peer Educator, University of Illinois Extension, 2017.

Reviewed by: Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension, 2017.

IOUs: ‘There’s an app for that!’

It’s a common joke, but it seems to be holding true.  We use apps to share pictures, check e-mail, and chat with friends—now, we have the ability to transfer money to our friends and family, regardless of our location or which financial institution we belong to.  Cash may have been king in the past, but it’s looking more like our smartphones are king today.

Have you heard of Venmo? Squarecash? These are just a few of the apps that allow you to send money to anyone, anywhere, anytime.  From a convenience standpoint, these advances are amazing—but what are the costs of convenience?

You may still think of identity theft as the result of sneaky thieves rummaging through your trash, gathering bank statements and those annoying credit card offers you threw out last week.  While this method is still common, it’s only one of the ways that thieves steal financial information today.  Why go dumpster diving when you can use hacking to gather financial information and access money electronically?

Creepy.

It’s important to protect your sensitive information regardless of whether you have $20 in the bank or $2,000 in the bank. Identity theft can damage not only your liquid assets (cash in your checking or savings account), but your credit scores as well. Even your criminal record can be affected by identity theft. Sounds crazy, but you could be arrested for a crime someone else commits while pretending to be you.  Every time you link your personal information to a website or an app, there’s a chance that information can be accessed and abused, so it’s important that you protect yourself.

Here are some tips to assess security risks of peer-to-peer transfer apps:

The Federal Trade Commission recommends that you look for three factors to help make your account(s) less vulnerable:

  • Two-factor authentication: This requires you to enter a password plus something else — like a code sent to your phone —  to prove it’s really you.
  • Pin code: Look at creating a pin to send a payment — like a pin you might use at an ATM.
  • Social media permissions: If a payment service is linked to social media, it could broadcast your payment history to your network so make sure you check those permissions.

Additionally, think about the protections built into your financial accounts. For example, some apps may charge you for using a credit card, but if something goes wrong you have more protection under the law by using a credit card than if you use a debit card or link a checking account directly.  To learn more about protections under the law for credit and debit cards, watch the Staying on Good Terms: Credit & Debt Webinar HERE.  Take the quiz to work towards your Borrowing Badge!

Know what happens if something goes wrong–will you get an e-mail explaining a new recipient, access from a new location/device or if your account information, like your associated e-mail, is changed?

Learning more about security features may not be fun, but 5 minutes could save you from identity theft which can take months or years to recover from.  Remember, knowledge is power!

Sources:

FTC Tips, 2015: https://www.consumer.ftc.gov/blog/paying-your-friends-through-app-read-0

More Information: Citizens Utility Board, 2013 http://www.citizensutilityboard.org/pdfs/ConsumerInfo/P2P.pdf

Written by Carol Brobeck, University of Illinois USFSCO Student Money Management Center

Choosing a Financial Professional

Managing money is not an innate skill and often it makes sense to turn to expert help. Whether you’re looking for help with your taxes, choosing investments for your retirement savings, or managing multiple saving goals, financial professionals can help you explore alternatives and strategies to best manage your finances.

However, choosing a financial professional is a scary proposition for many people. It can be hard to decide who you want to trust with your money and your future dreams. Unfortunately, government regulations do not protect the consumer very well in this area. Anyone can call themselves a financial adviser. Taking a little time to investigate financial professionals before you begin working with someone will allow you to make an informed decision.

First, think about what services do you need. This will help you identify a financial professional who has experience and education that matches your need. For example, if you are 24-years-old and are looking for investment advice, then you may not want to choose someone who specializes in estate planning for 80-year-olds. Or, if you need advice about filing taxes for your small business, then you need someone with tax expertise.

Are you puzzled by all the initials following financial professionals’ names? University of Illinois Extension’s website, Choosing a Financial Professional, includes a Guide to Financial Credentials. This in-depth table lists many financial credentials and information such as the education required to receive the credential. You may want to start your research into financial professionals here.

At this website there are also links to several online searches that can connect you with financial professionals in your community. You may also want to ask friends or other acquaintances for suggestions of financial professionals.

However, no matter who refers you to a financial professional, take the time to interview two or three people to find one that is a good match for you. Ask specific questions such as how much and what type of continuing education does the person you’re interviewing engage in on a regular basis? The financial world, and related laws and products, change at a rapid pace; continuing education is essential. How is the financial professional paid? Is the financial professional’s income fee-based or commission-based? You have the right to know how much financial services will cost and how they will be calculated. At the Choosing a Financial Professional website you can download a free Interview Guide to help you think of questions to ask.

Even if someone is the perfect match for your Uncle Fred, it doesn’t mean that they are the right financial professional for you. Be sure you’re comfortable asking questions and talking to the financial professional. You want someone who can explain things in a way that makes sense to you.

One last, but important, step: Once you narrow your choices, check the financial professional’s background and references. In Illinois, check a person’s licenses and disciplinary records by calling the Illinois Securities Department, toll-free 1-800-628-7937. If someone is helping you buy or sell investments, you do want to be sure that they are licensed to do so in Illinois.

If you have more questions about choosing a financial professional or other financial matters, please visit our Plan Well, Retire Well blog, or contact us at FinancialWellnessUIE@gmail.com or call (217) 333-7672 for more information.

Written by Kathy Sweedler, Consumer Economics Educator, University of Illinois Extension