Your Financial Fingerprint

Your fingerprint is unique to you, so is your credit report.

Do you know WHAT is on your credit summary report?

This information is important because your credit history is your life line in the “real world”.  Most, if not all, potential employers will request your credit report along with a background check.  Your credit report could be the deciding factor on whether you will be hired.  Why do they request this?  They want to see how well you manage your finances.  It shows how responsible you are or not in that manner.    

Know Your Rights

By law, thanks to the Fair Credit Reporting Act (FCRA), you can receive your credit report summary from each of the reporting bureaus (Equifax, Experian and TransUnion) for FREE. Yes I said it, FREE.  What’s the catch?  There is no catch, well… you can only request one report from each bureau once a year, but it beats paying for it.  J

Visit www.AnnualCreditReport.com to exercise your rights to a free credit report summary. (This site is not the same as the fancy commercials you see on TV). 

One piece of information this report leaves out is your actual credit score - which you do have to pay for.  Your score is important but what affects your score is more important. It is important to review all three reports to make sure the reports are accurate because people make mistakes. 

If you do decide to pay to receive your credit score then you must know what your score means to your financial fingerprint.  Your credit score may be extremely low due to identity theft, clerical error, the reasons are endless.  You will never know unless you LOOK.

What is a good credit score? In my opinion anything above 710 will get you a reasonable interest rate on a purchase such as a car, home, etc.  If your credit score is below this number, check out my next blog which will talk about how to improve your credit score.  But hey, you (will) have already completed step 1, which is, check your credit report!  Now, if you don’t have a credit history by now (…crickets…) that is an entirely different issue.

ONE More Nugget

One more nugget before I leave you - know the difference between a hard inquiry and a soft credit inquiry.

Hard Inquiry vs. Soft Inquiry:

Every time you apply for a credit card, open a phone line, establish an account for your utilities, purchase a car (unless paying in cash), basically any and everything – most companies will check your credit score.  It is important to know what type of inquiry they will complete as it could do more harm than good.

Hard Inquiry

This type of inquiry will negatively affect your credit score and will drop it by a few points.  A person or company will pull your credit score if they intend to lend you money.  This is why it is important to do your homework before you go, for example, car shopping or house hunting.  You do not want numerous potential lenders to pull your credit score.  Ouch!  Also, fun fact, opening up a checking account is a hard inquiry. 

Soft Inquiry

This inquiry has no effect on your credit score.  Most soft credit inquires will be pulled by potential employers, landlords, and pre-approval credit cards or loans. 

Before you decide to purchase or do anything that you think will affect your credit score, do your research first.  Do a quick Google search to see if it is a hard or soft credit inquiry.

Have a great week.

Stay blessed!

Rianka D.

Enhance your financial literacy - learn more about the Fair Credit Reporting Act at www.ftc.gov/credit

Preparing the Next Generation

One of the biggest financial challenges you may face as a parent is saving for college.  The burden will not be too overwhelming if you start saving now.  Plant the seed, water it and watch it grow.   

There is a savings vehicle where you can put money aside, avoid taxes on the interest and dividends earned AND receive a state tax deduction (in most states).  This savings vehicle is called the 529 Plan. 

The 529 plan is a great way to save for college.

What is the 529 Plan?

• It is a savings plan operated by a state or educational institution. It allows owners (you) of the account a tax-advantaged investment vehicle to save for college.
• The money invested in this account can be used for qualified educational expenses, which are:
• Tuition and fees
• Course related books, supplies, and equipment
• Computer software and laptops

Types of 529 Plan:

Savings Plan – Allows you to save for college by investing your contributions into mutual funds or similar investments.  This plan can be used for in-state or out-of-state institutions (this is key for flexibility of use).

One option is to invest in “Enrollment-Based” savings plan (may also be called Age-Based savings plan).  This type of plan becomes conservative (less risky) over time as the child approaches college age/ or by the year they enroll into college. 

• For example, Baby John is 5 years old. He is expected to attend college at age 18 (in year 2025).  If the Enrollment-Based option was selected, one could invest in the 2025 plan.  This plan will automatically become conservative (less risky/less stocks) as baby John gets older. (I hope I didn’t lose you - if I did just post your questions). J

Prepaid Plan – Allows you to “pre-pay” for college for in-state institutions.  The plan may be converted for use for an out-of-state institution.    

One benefit of the 529 plan is the flexibility.  As the account owner, you can choose the recipient of the account (the beneficiary) and change to a different person if necessary.  For example, you saved to baby John’s 529 plan for 13 years - his college education is now fully funded through this 529 savings account; he does not have to pay a dime. (Thanks Mom & Dad).  However, John has excelled in school, aced his SATs and now has an all expense paid full academic scholarship to Virginia Tech.  What are you going to do with the money saved?  No worries, the beneficiary of this account can be change to his sibling, cousin, or even you if you want to go back to school.

If you do not want to change the beneficiary to another person/do not want to use the money for an qualified education expense, then the money can be withdrawn. However, Uncle Sam will receive his cut as no qualified expenses were paid.

Back to the positives - anyone can contribute to this account!  Now the birthday money received from friends and family that is usually blown on candy and soon forgotten toys can be saved into the college savings account.

This is a glimpse of information - I highly encourage you to learn more about 529 plans and start saving.  Check out some useful links below…  

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Just in case you think you can still wait to save for college, check out some of the facts below:

Cost of College Today: 

·      In-State

•  The average annual cost for tuition, fees, and room and board at a four-year institution is $17,000.  ($68,000 for four years)
•  From 2011, the average total charges increased by 6%

·      Out-of-State

• The average annual cost for tuition, fees, and room and board at a four-year institution is $30,000.  ($120,000 for four years)
• From 2011, the average total charges increased by 5.2%

·      Private

• The average annual cost for tuition, fees, and room and board at a four-year institution is $40,000.  ($160,000 for four year) Yikes!
•  From 2011, the average total charges increased by 4.2%

(Statistics gathered from The College Board)

One thing is for certain, when it is time for baby John to attend college, the cost will be higher.  Start saving today, it will be one of the best decisions made. 

Stay blessed.

Rianka D.

I couldn't help myself.. this is too cute. J

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Useful Link:

Misconceptions about 529 Plans:

http://www.savingforcollege.com/articles/20091016-10-top-misconceptions-about-529-plans

In-depth Information about 529 Plans:

http://www.sec.gov/investor/pubs/intro529.htm

What is “Golden Financial Nuggets”?

While studying financial planning in undergrad, I was so amazed to learn how much I actually didn’t know.

After years of studying, researching and working in the profession, I know so much more than I once thought I knew.  Although I am not a guru in personal finance (not yet at least), and I may not know everything, I know enough to be dangerous (as I like to say).  J

Why this blog…  Over the years, I’ve had conversations with friends and it usually went something like this… “I heard of estate planning, it involves Wills, which are only for the wealthy”,  “I should lease a car instead of buy because it’s a depreciating asset”, “we just had a baby, I saw a baby commercial, should I invest in their plan for college?”  And my favorite, “I am too young to start saving for retirement, I’ll start in a few years”.  Ahh, the conversations made me cringe.  I wanted to break out all of my books and have a personal finance 101 session.  I need to keep my friends informed, I have to!  There is soooooooo much WE (you, not me… but it sounds better including me, too, lol) should know that we don’t know.

Now that I have increased my knowledge about personal finance, what should I do about it?

Write a blog you say?  What a wonderful suggestion.

Well, ta-da…. here are some nuggets, some golden financial nuggets I hope you can keep in your pocket and use one day when it is helpful.  Hopefully, some blogs will be helpful TODAY.

I will keep this blog very informal and discuss matters that are relevant and useful today to better your tomorrow.  I pray it will give you the power to progress forward in your personal financial life.

If you think of some topics, let me know - I am all ears. 

But first… because so many friends are expanding their families with cute little babies, I feel I have to touch on college savings.  As my nana always told me, education is the key to success. 

Stay tuned!

Romans 12: 6-8