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Melisa on the Money

Confessions from the 800 FICO Score Club

I have been obsessed with personal finance before I even knew that was a thing. My mother says that I have been “watching money” since I was a child. When my brother and I would get a $20 allowance for outings, I would almost always return home with at least $15 while my brother came back with none. As a child too, I saw what role money played in my own family life. If you didn’t have enough of it there could be frustration but you can also use it wisely and find more ways to make more of it.

In elementary school, we covered basic home economics that included lessons about how to write a check, balance a checkbook and understanding higher purchase. Investopedia defines a Higher Purchase as a method of buying goods through making installment payments over time that originated in the united Kingdom. This was my first introduction to the concept of “buying” something when you didn’t have the money to pay for it outright.

College Life and  Easy Credit

Fast forward to the point when I left my home, in St. Kitts, after high school and started college in the United States,  I signed up for my first credit card shortly after getting on campus. As an immigrant to the United States, no one prepares you for the ease of getting credit in this country. It’s still amazing to me that a recent immigrant, with hardly any money, could get approved for a credit card just by signing some paperwork on a folding table on the campus quad.

This, get into debt instantly card, was a very new concept to me. I had student loans already, and kind of knew the deal with them (or so I thought) but credit cards would take some getting used to. Needless to say, my credit card gave me access to other people’s money, to buy things I could not afford on my own, in just one swipe.  And swipe I did.Credit cards funded my shopping trips to Aventura Mall and my frequent travel back home to St. Kitts for Christmas break.

Store cards were another story, as a college student I would always the opportunity to get the store discount by signing up for a new card, and by my third year in college I had at least 5 credit card and store cards from Macy’s, New York  & Company and Company, Gap and Old Navy.  I remember my college friend, Vanesa, telling me “Girl, why do you have so many credit cards?” and I really didn’t have an answer.

The only upside to my credit card escapades was that I always made sure to pay my credit card bills on time and keep my utilization low and had over interest to the credit card companies. Of course, for this “good” credit use I was rewarded with high and higher balances and at one point one I had combined credit available of more than $30,000. Ridiculous, I know!

The 700 FICO Score Club

Although I was never educated about the “right” way to use credit cards, I always paid off my credit card balances over time, as quickly as I could; avoided late payments; and by the time I completed college, I had a 700+ FICO score and at least 10 credit cards. Even with the excessive number of credit cards I had, I never really thought that this was problematic. After all, I maintained a “good” credit score always paid back the charges I made and never used all the cards at the same time. Even with this good credit score and good credit, and I never used all of them at the same time. and  in

The truth is though that my good FICO score and made me think I had more money that I had and my credit limit subconsciously an extension of my budget. So much so, that all throughout college and graduate school, I never really prioritized building an emergency fund. This lack of planning for a rainy day, caught up with me when I completed graduate school and could not find a full-time job for 8 months. My credit cards, in part, became my emergency fund for that period. I was able to make my credit card minimum payments on time and once I got a full-time job, I paid off the remaining balances, kept my stack of credit cards, and  continued to spend on credit. This time, though, I prioritized building an emergency fund since I had already experienced how  living without a rainy day fund left me without a safety net.

The 800 FICO Score Club

Last year, when my family and I, bought a condo, my credit score hovered around 790 and of course, that served me well when it came to getting the best mortgage rate possible and enabled me to position myself to compare and negotiate with multiple lenders to ensure I got the best mortgage deal possible.

After becoming a home mortgage owner, keeping track of the new bills that come, like HOA fees, water bills, and renovations was a challenge, first. I had to reorganize the family budget and it did not help that I financed a portion of the renovations on my credit card. That in and of itself was not a terribe financial move, since it was at  0% introductory rate and I had already planned to use relocation reimbursement funds to clear those charges. But what the problem  came when I kept adding to the balance without keeping track of my spending and saw my credit card balance creep up by more than $1,000  more than the original renovations costs.

This is when I realized how my unplanned spending,  supported by my credit cards was really a problem. I am great with a budget and usually good at sticking to it, except when I use a credit card for an unplanned purchase. More often than not, using my credit card enabled me to spend without asking myself if this was a want (which most of the time it was), where would it fit into my current budget and did I really need it to purchase it right now?

Excellent Credit and Bad Spending Habits

I had to be really honest with myself and admit that the way I was spending on my credit cards was not serving me well. I had been in this cycle before and really did not want to continue with the cycle of the never ending credit card payments. The right way to use credit cards is to use them to make charges that are already accounted for in your budget. I wasn’t doing that and I recognized that I almost always spend more than I planned when I use my credit card. Psychology Today sums up my behavior as a result of the painless nature of spending on credit cards which can result in overspending. Whatever the reason, I committed to put a stop to it, this year.

First, I stopped spending on my credit card and committed to making purchases with the cash in my bank account. Shortly after making that commitment, I really wanted a computer, and in order to live up to my commitment of paying cash, I ended up buying a used one from my brother. #MoneyMasiveMoment

The second thing I did, was close all my store credit cards, that I hardly used, but somehow always found a way to spend on them when i got in the stores. My Macys, Gap, Old Navy, Target cards had to go. I’ve also closed almost all of my other credit cards, except, one for business use, and my first credit card that I haven’t used in many years. I am planning to close my oldest credit card at some point but haven’t decided exactly when, yet.

So far, I have gotten more in tune with my money and glad I became aware of the triggers that kept me

Do you overspend on credit cards?

I am sure there are many of us have made unplanned purchases that we really did not budget for on credits cards. And even if you pay off your credit card debt, you can reflect on whether being conscious of what may be causing you to overspend can be addressed to prevent that behavior. Once you know that you have been overspending on credit cards:

  1. Recognize when you overspend and what causes it.
  2. Commit to changing your habits.
  3. Ask yourself whether the unplanned purchase your are considering is a want and whether you need to buy it right now.
  4. Weigh how your overspending may delay you from reaching other more important financial goals.
  5. Limit your spending to what is in your bank account and your budget.

Even when you implement these practices you may have slip ups, but the key is to commit to changing your behavior so that you can limit overspending and have a better handle on how you use your money when it comes to spending in credit cards.

Melisa Boutin.

Featured – Melisa Boutin on Jewels Unveiled with Dr Judith Fletcher Radio Show

I am so excited to share my interview with Dr. Judith Fletcher’s Jewel’s Unveiled Radio Show that first aired on WDJY 99.1FM in Metro Atlanta on August 24, 2016.

We chatted about how to minimize student loan debt, as a college student, ways to reduce the costs of your college attendance, tackling student loans if you already have them and tips for families planning for college.

Take a listen!





What did you think of the interview? Let me know in the comments below.

Thanks for listening!

Melisa Boutin.

A Money Workshop For Women: Q&A

Last month I attended Transform Philly Church‘s Money Workshop For Women, in West Philadelphia with Bola Sokunbi of CleverGirlFinance.com presented. I was glad to have the opportunity to attend to support my Personal Finance Friend, Bola, and visit my old stomping grounds of West Philadelphia.

The 2-hour workshop presentation covered Money Mindset, Budgeting for Greatness, Investing and Building Real Wealth. And there was a room full of attentive attendees, keen on learning all Bola had to share about building wealth. On a Saturday morning at that, these women were not playing! It was so great to see!


 

 


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There was particular interest in investing and learning more about index funds, as well as, understanding and managing student loans and getting rid of debt.

During the Q&A portion of the workshop, Bola invited me to chime in on paying off student loans and making a plan for your money, in order to reach your financial goals. Of course, I happily jumped at the chance to join in!

 

 

 

Here’s a summarized version of the Q & A portion of the workshop.

Money Workshop For Women

Questions & Answers


Money Question 1:

Can you buy index funds within your 401K?

Money Answer 1:

Bola: What you have available to purchase within your 401K is dependent on your company. Companies usually create an agreement or plan with brokerage firms. Based on whatever agreement they structure, with the brokerage firms, 401k’s may offer one mutual fund, or ten.

What you have available to purchase within your 401K is dependent on your company.
They offer they may offer individual funds, they may offer index funds, they may offer a Roth option. It just depends on your company.

You can buy index funds through a brokerage. My favorite brokerages are  like Vanguard or Fidelity because they offer great customer service and I really like them.

Melisa: Another thing is that you can talk to your company’s HR, like Bola suggested during her presentation, to ask about getting more information regarding what type of funds are available within your 401k and then your HR department can tell you whether there are index funds available within your 401k.

Keep in mind too, that if your employer provides a match on your 401k contributions and you have contributed to a level to get that match, and you still want to save more, you can open you own Roth IRA, with Vanguard for example, and then Vanguard would have more options and you can be in control of what you invest in.

Bola: You can invest outside of your 401k, but the recommendation is that you get the full employer match then go outside.

Money Question 2:

For Melisa, what I want to know is, in terms of student loans, I am just intrigued about how you managed to pay off so much, save for a home. I am curious as to how you stayed disciplined to budget?

Money Answer 2:

Melisa: Like Bola covered, it starts with your mindset. I graduated with $68,000 of student loans and just looking at my big picture, I had no money but I had all these loans. I knew that this was something that I wanted to get rid of, but also invest and save for a home one day.

My mindset, from the beginning, was to figure out how to pay as much as possible towards the loans. I started out with a plan that I would pay off all my student loan debt in 3 years, but life happens, and I ended up paying off $37,000 in 5 years, and I still saved and invested.

My mindset. from the beginning, was to figure out how to pay as much as possible towards the loans.
One thing that I did when I finished school is keeping my expenses low. In general, your “must have” expenses should typically be less than 50% of your income, but I knew I had all these loans, so I kept my “must have” expenses much lower than 50% of my income.

I did not get any new or financed cars. I got a used car that I paid $6,000 for and I kept that car. By keeping my expense low, I had more money to allot towards savings and debt payments.

When I started my first full-time job, I made sure I did not even know how to live on 100% of my income. One of the first thing I did was sign up for my 401k. I also had the option of a Roth 401k, so I was investing in both automatically. Then I determined what amount I would put towards my student loans and told myself that even though I like to travel, I will have to just do road trips only. I had to ask myself what are my values and one of my main values was to get out of debt.

By keeping my expense low, I had more money to allot to savings and debt payments.

That meant that I was committed to not getting a new car, even when my car got totaled, I got another used car. I was very conscious of what my goals were, automated my finances and saved my raises instead of inflating my lifestyle. I chose to stay in the same apartment I had and commit more money to savings and pay off more debt.

This is how I was able to buy a home, even when I was not done with paying off my debt.

Money Question 3:

If I have debt, should I be saving? Should I be contributing to my 401k, if I still have debt? How do you decide?

Money Answer 3:

Bola: I am of the opinion that you can save and pay debt, that’s my philosophy. Dave Ramsey, who I love, will tell you to stop saving for retirement, save $1,000 in your emergency fund and put, everything you can, towards paying off your debt. I think that you have to save for retirement, no one is going to prepare for your retirement for you. At the minimum, put that $1,000 emergency fund there, do that. If you are employed and you employer offers a company match for retirement savings, get that match. To me, it doesn’t make sense to forego  the employer match.

Money Workshop For Women Money Mindset QuestionIf for example you contribute 10% toward retirement and get your employer match, then save $1,000 for an emergency fund, keep saving for retirement and then get aggressive with your debt. If you are going to sacrifice not saving anything else, you need to get aggressive with your debt. The quicker you pay off that debt the sooner you can come back to savings. And it’s important that you come back to that savings. If your goal is just to pay off debt here and there and you are not going to save any money, then you are wasting your time. You need to get aggressive with paying off your debt and that means, paying off as much as you can, as quickly as you can.

You need to get aggressive with paying off your debt and that means, paying off as much as you can, as quickly as you can, to destroy that debt. If it is a 2-year plan, or a 3-year plan and you know at the end of that plan you will be at zero debt, then

You need to get aggressive with paying off your debt and that means, paying off as much as you can, as quickly as you can.
When you consider the interest rate that you pay for your debt, it doesn’t make sense when it compares to savings in a bank account. But you retirement is an investment, it’s not like savings in an account at less than 1%.

So again, establish your emergency fund, fund your retirement and get aggressive with your debt.

 

Melisa: To piggy back on what Bola says, when it comes to investing in your retirement and you are getting an employer match, why would you miss out on that employer match when paying off debt, when you could choose to get an extra job to put towards debt payments.

Also, think about whether choosing to stop saving for retirement will make your debt payoff period shorter by two years or more. Consider if it will be worth it for you to forego saving for retirement if it will not help you pay off your debt in less than a year.

Bola: Think about the fact that your contributions to you retirement plans, 401k or 403b, is pre-tax, so if you were to use a take home calculator, you will see that by the time you are taxed 25% – 35% you will have less than what you would have contributed to your retirement to put towards your debt.

Money Question 4:

Any advice for high school senior going to college?

Money Answer 4:

Bola: Sit down with your parents and have that discussion about paying for college. Once you go to college, when you go to the job fairs do not sign up for any credit cards, under no circumstances. Get a part-time job and start saving your money, your friends are going to want to go out and have fun, and that’s okay, you can spend a portion, but think about saving half of your paycheck and putting it aside until the foreseeable future and not spending any of it.

Just start developing the habit of savings and not signing up for any credit cards.

Money Question 5.

What should I do to get a handle on my student loans that are in the post-graduation grace period?

Money Answer 5:

Melisa: The first step is to make sure you know that you have all you loan information. Check your credit report for private student loans and the National Student Loan Data System for Federal student loans. Prioritize your private student loans and for your Federal student loans figure out which of them are accruing interest during the grace period.

Depending on the amount of interest that accrues during the grace period, you can contact the student loan service and ask whether you can pay the accrued interest off before it is capitalized and added to the student loan principal balance.

The first step is to make sure you know that you have all you loan information.
When accrued interest is capitalized, this will make you student loan principal large and can increase the size minimum payments. If you have room in your budget you can apply payments to the student loan interest that is accruing right now, during the grace period.

Once the repayment period starts, focus on paying off your private student loan because there aren’t as many options for deferment and forgiveness like the Federal student loans.

Money Question 6:

As a current graduate student with loans in deferment, what should I do now to get a handle on my student loan debt?

Money Answer 6:

Melisa: First, make sure you have all the account information on your student loans, and what their current status. For your student loans that are in deferment, while you are in graduate school, find out how much interest is accruing while the loans are in deferment.

There are also, certain benefits you can get by enrolling in an income-driven repayment plan where even if you have a $0 minimum payment, those would still count as eligible payments certain forgiveness programs available for Federal student loans.

For your student loans that are in deferment, while you are in graduate school, find out how much interest is accruing while the loans are in deferment.
In order to be eligible for these forgiveness programs, your loans will have to be consolidated or be direct loans. You might want to check on the status of your loans right now, on that front.

You can also, estimate how much interest will accrue on your student loans during the deferment period, and even if you can’t pay it off now, you can make a plan to pay it off before it is added to your principal.

That sums up the Q&A portion of the Money Workshop!

What are your money questions about savings, investing and paying off debt. Chime in below!

Thanks for reading!

~Melisa

(Photo Credits: Transform Philly  Church)

Featured – Melisa Boutin on CBC National News: RBC fee hikes in the Caribbean

Melisa Boutin CBC National News Canada Royal Bank Fee Hike Caribbean

If you live in the Eastern Caribbean you are familiar with the recent roll out of a $25 XCD (~$9 USD) fee for savings account at Royal Bank of Canada (RBC) Branches. Well, Caribbean people were having none of it and there was a wave of protests and a rush to close savings accounts at RBC Branches throughout the Eastern Caribbean Currency Union states, with people waiting in line for up more than 4 hours.

Sophia Harris of CBC National News recently spoke with me about why RBC’s Caribbean customers were so upset with the introduction of the new fees, to the point of protests.


Related Post: Caribbean Banks: When Raising Your Fees, You Can Do Better



I shared that:

  1. Customers were not adequately notified.
  2. Going from $0 to a $25 XCD fee was too steep of an increase.
  3. Royal Bank of Canada did not give enough consideration to customers when implementing the fees.

Sophia also shares the responses she received from Royal Bank of Canada.

You can read the full article here: Royal Bank sparks backlash with fee hike in the Caribbean

Were you one of the customers affected by the new fees? What do you think of the way Royal Bank of Canda rolled out the fee and the amount of notification given? Let me know in the comments below!

We Need Student Loans Answers In The Caribbean

It’s sad to say, but my experience with my Caribbean student loan left a lot to be desired. From the time I took out my student loan, communication with my Caribbean lender was difficult. While attending school in Miami, Florida I had to send snail mail requests for disbursements, and had never received any account statements while I was in school.

I just accepted this as a Caribbean thing and put up with the inconveniences. Little did I know how this lack of communication would really negatively affect me.

On Groundation Grenada’s blog I share Why We Need Student Loan Answers in the Caribbean. I had a general understanding about how Caribbean student loans worked but  after 8 years of making payments:

 I would learn about other aspects of the agreement, of which I had no clue.

  • 9% interest is a hefty interest rate for a 5-figure debt.
  • A [$335 US] monthly payment sizable portion of my monthly earnings, especially when I had to service U.S. Student Loans too.
  • [0.00] dollars of my first two years of repayments would go to my student loan principal balance, which I only realized last year (2015).
  • 100’s of US dollars would have to be spent calling the Development Bank to keep track of my student loan payments.
  • There would times when I would not receive account statements; and that there was no easy way for overseas borrowers to access their account information.
  • Other borrowers have had the similar challenges.
  • That this experience would lead me to want to help others to understand their student loan and avoid challenges I had to face.

Read more on Groundation Grenada’s blog on here.

Do you have a student loan from a Caribbean bank? Share your experience in the comments!

-Melisa