Archives for November 2012

Should You Use Your Cell Phone As A Credit Card?

Technology has been rapidly developing to the point that it's possible to do almost anything with the help of a smart phone. You can get directions, pay your bills, and save coupons with the help of your smart phone. And, increasingly, your mobile device is getting to the point where it can be used as a credit card.

Electronic Wallets

There are different companies, from Visa to Google, developing electronic wallets. You can store information about your credit cards and other payment methods in your smart phone, and then use them to pay for items at the store — without the need for a huge physical wallet in your back pocket. In some cases, these wallets are even developing the ability for you to wave your phone in front of a terminal to complete the transaction. (Right now, a lot of these wallets work mostly on loyalty programs and gym memberships, since you only need to scan a barcode.)

cell phone credit card The technology that would be used by cell phones in this manner is called near-field communications (NFC). However, many stores don't have NFC capabilities with their card readers. The result is that, until more stores adopt this technology, you need to store your payment information attached to a barcode, or use some other method (Home Depot, for example, allows you to access your PayPal information and pay with PayPal at its terminals).

Some credit card issuers are starting to get around this, though. Consumer Reports Money Adviser points out that some issuers, particularly Citi, are sending PayPass stickers that you can place on your cell phone. These stickers use the RFID PayPass technology that many retailers have incorporated. This is where you tap the terminal with your card, and the frequency is used. No need to swipe the magnetic strip. These stickers are one way to convert a cell phone into a credit card without the need for NFC technology to be adopted.

Can You Protect Your Electronic Wallet?

What you really want to do, though, is make sure that your electronic wallet is well protected. If you have information saved on your smart phone, make sure you have a lock-down app. These apps allow you to lock the phone so that if it is lost or stolen you can prevent someone from getting in and using your personal information. There are also apps that allow you to remotely wipe the cell phone, turning it into an expensive paperweight.

With the sticker, though, you have to be more careful. If you lose your phone, or have it stolen, you can't exactly disable that sticker without calling and canceling your credit card. Additionally, you have to make sure that the sticker doesn't fall off your phone, leaving a random RFID sticker for someone to use. If you don't notice the sticker is gone, it could be hours or days before you begin to rectify the problem.

In the end, technology is likely to continue changing the way we interact with money. This isn't necessarily a bad thing. However, it's important that you understand the challenges and prepare to boost your security, even as you enjoy the benefits.

Student Loans: Federal Vs. Private

By Miranda Marquit Leave a Comment

One of the realities of attending college right now is that it costs quite a bit. Most students need to borrow money in order to pay for the rising tuition costs. It's not just tuition, either. There are costs associated with housing, food, student fees, and books.

With the cost of college rising, student loans are more and more prominent. However, not all student loans are the same. You generally have two different options when it comes to student loans: federal and private.

Federal Student Loans

student loan federal vs private You can borrow money directly from the federal government to help you pay for school. Direct Loans provide you with low-interest loans to qualifying schools. You might receive one of two types of loans:

Subsidized: If you meet the income requirements, you might qualify for a subsidized loan. With this type of loan, your interest is paid on your behalf while you are in school. You don't start paying interest until you are done with school and you start making payments on your loan.
Unsubsidized: You might qualify for a federal student loan, but make too much to be considered for a subsidized loan. In these cases, you have an unsubsidized loan. You are charged interest as soon as the loan is issued. You can choose to pay the interest while you attend school (but you don't have to make principal payments), or you can choose to defer paying interest. The interest is still charged, and added to the loan total, but you can wait to pay it.

Federal student loans generally have competitive interest rates. The payment terms are usually easier as well. When you are finished, you can participate in a program that bases your payment on your income level, and there are other programs that can ease the burden of paying off your student loan debt.

Private Student Loans

Some students find that they don't have enough from federal aid to cover the cost of an education. In order to close that funding gap, they turn to private student loans. Some private lenders will allow you to wait to begin repaying your loan until after you graduate, but some require payments sooner.

Additionally, private student loans often have higher interest rates than federal loans. Private loans also don't come with the same pay off programs. You have to work something out with your lender in a way that works for the lender, similarly to how you would handle any other loan.

Interestingly, P2P lending is becoming an increasingly popular choice for school loans. There are web sites like Tuition U that match up students with lenders, and in some cases students are finding that even more traditional P2P sites can help close the college funding gap.

It is best to try for scholarships and grants, and save up money with a 529 Plan, before deciding to borrow for college. After all, borrowing — no matter where you get the money — means that you have to pay interest as well, and that can be quite expensive over time.

3 Tips For Choosing A Financial Adviser

By Miranda Marquit 1 Comment

When it comes to managing your money, sometimes it makes sense to get a little help. The right financial adviser can help you create the right financial plan for you, and provide you with solid budget suggestions.

A good financial adviser can help you figure out what you need to do next to keep your finances successful, from recommending a retirement savings program to helping you find the right investments for your income portfolio. Choosing a financial adviser can be a little bit trickier, though. Put some thought into it, and use the following 3 tips to help you make your decision:

1. Fiduciary Responsibility

choosing a financial planner One of the best things you can do is look for someone who is required to show fiduciary responsibility. This means that the financial adviser has to put your financial well being ahead of other considerations — like his or her potential commissions. While even a fiduciary might not husband your money as well as you might like, you can still trust this type of adviser a little more than someone who can put his or her own financial interest ahead of your own. Consider using a Registered Investment Advisor, or some other certified financial planning professional who must act as a fiduciary.

2. Reasonable Fees

Another consideration is the fees charged. There are a few options when you are choosing a financial adviser. Some advisers charge a flat hourly fee, or charge a flat fee for certain planning packages. Others charge you a percentage of the assets you have under management. Still others make money on commissions from products that they get you to use.

Carefully consider which fee structure works best for your situation. You should also look for those with more reasonable fees. Remember that there might be management fees and transaction fees. Research fees as closely as you can, and look for an adviser that charges reasonable fees, and that recommends products with relatively low fees.

3. Personality

You also need to be able to trust your financial adviser. Consider the personality involved. Often it makes sense to sit down and have an “interview” with a potential investment adviser. What are your first impressions? Do you feel comfortable with this adviser? Do you think that he or she knows the subject, and understands your situation?

Consider checking references of other clients. You can also check up on licenses and certifications. You are sharing personal financial information with your financial adviser, and allowing yourself to be guided. You really do need to be comfortable with him or her — and with the situation.

However, you should also consider that you might not want to choose someone who is a friend or relative. Even though you might trust him or her, you might not want to deal with the social ramifications of working with someone who has such a personal relationship with you outside the professional relationship. Working with someone you know means that you might not feel comfortable switching if you feel your finances demand it. It's often a good idea to keep these relationships separate.

Keeping Sight Of Your Retirement Goals

By Miranda Marquit Leave a Comment

As humans, we often see things in the now. Sometimes, it can be hard to look beyond what is happening right now and see the big picture of the future. It can be easy to forget long-term benefits as we look at short-term possibilities.

However, if you want to reach your goal of a successful retirement, you need to remember the long-term, and spend some time focusing on the big picture things.

keeping sight retirement goals

Don't Let Current Worry Push You into Poor Financial Decisions

One of the worst things you can do is let short-term worries push you into making poor financial decisions. It's easy to panic when the stock market drops. Everyone else is freaking out and selling. Before you join the herd, though, think about the long-term. Over time, the stock market tends to gain. So, if you have well-chosen investments in your account — investments with solid fundamentals, or index funds that track the market — you are more likely to weather the downturns.

Instead of panicking and selling, consider whether or not you should stay the course. Chances are, especially if retirement is still 15 to 20 years away, that your portfolio will recover in the long run. If you panic and sell, you could easily end up missing out on some of the opportunities that come with buying more at a discount, and reaping the benefits later.

Be Wary of Using Your Retirement Account as an Emergency Fund

When times are tough, it can be tempting to ease the current situation with the help of a little extra infusion from the retirement account. It is possible to borrow money from your 401k, and even use your Roth IRA as an emergency fund, without incurring tax penalties. However, while this might be a short-term solution to your current worries, you might not benefit in the long run.

Having that money taken out of your account results in an opportunity cost. You are no longer earning interest on the money, and there is no getting that time back. With the 401k loan, you will probably pay it back (with interest) in order to avoid the tax penalty. However, when you withdraw contributions from your Roth IRA, it's difficult to find the will to repay the money, since there are no penalties for withdrawing your contributions.

Remind Yourself of the End Result

Make it a point to remind yourself of your end result. Sometimes, when we are in the moment, and concerned about what's next, we make snap judgments that put the future at risk. Instead, take a step back, breathe deep, and consider your alternatives. While you might have to turn to your retirement funds at some point in order to stave off a true financial emergency, consider other options first. Can you make more money? Are there ways to cut your expenses?

Really think about how your current actions can affect your future. Realize that there is a very real chance that you end up with serious problems related to your retirement finances if you allow what's happening now to throw you off your long-term goals. Remember the big picture, and take steps to ensure that what you do now will keep you on track.

Main Menu