make with money and how to avoid them. Read on ………
Not watching your expenses.
It's very easy to overspend in some areas and take away from other
priorities, including your long-term savings. Our suggestion is to try
any system — ranging from a computer-based budget program to hand-
written notes — that will help you keep track of your spending each
month and enable you to set and stick to limits you consider
appropriate. "A budget doesn't have to be complicated, intimidating or
painful — just something that works for you in getting a handle on
your spending," said Kincaid.
Not saving for your future.
We know it can be tough to scrape together enough money to pay for a
place to live, a car and other expenses each month. But experts say
it's also important for young people to save money for their long-term
goals, too, including perhaps buying a home, owning a business or
saving for your retirement (even though it may be 40 or 50 years
away).
Start by "paying yourself first." That means even before you pay your
bills each month you should put money into savings for your future.
Often the simplest way is to arrange with your bank or employer to
automatically
transfer a certain amount each month to a savings account or to
purchase a U.S. Savings Bond or an investment, such as a mutual fund
that buys stocks and bonds.
Even if you start with just $25 or $50 a month you'll be significantly
closer to your goal. "The important thing is to start saving as early
as you can — even saving for your retirement when that seems light-
years away — so you can benefit from the effect of compound interest,"
said Donna Gambrell, a Deputy Director of the FDIC's
Division of Supervision and Consumer Protection. Compound interest
refers to when an investment earns interest, and later that combined
amount earns more interest, and on and on until a much larger sum of
money is the result after many years.
Banking institutions pay interest on savings accounts that they offer.
However, bank deposits aren't the only way to make your money grow.
"Investments, which include stocks, bonds and mutual funds, can be
attractive alternatives to bank deposits because they often provide a
higher rate of return over long periods, but remember that there is
the potential for a temporary or permanent loss in value," said James
Williams, an FDIC
Consumer Affairs Specialist. "Young people especially should do their
research and consider getting professional advice before putting money
into investments."
Paying too much in fees.
Whenever possible, use your own financial institution's automated
teller machines or the ATMs owned by financial institutions that don't
charge fees to noncustomers. You can pay $1 to $4 in fees if you get
cash from an ATM that isn't owned by your financial institution or
isn't part of an ATM "network" that your bank belongs to.
Try not to "bounce" checks — that is, writing checks for more money
than you have in your account, which can trigger fees from your
financial institution (about $15 to $30 for each check) and from
merchants. The best precaution is to keep your checkbook up to date
and closely monitor your balance, which is easier to do with online
and telephone banking. Remember to record your debit card transactions
from ATMs and merchants so that you will be sure to have enough money
in your account when those withdrawals are processed by you bank.
Financial institutions also offer "overdraft protection" services that
can help you avoid the embarrassment and inconvenience of having a
check returned to a merchant. But be careful before signing up because
these programs come with their own costs.
Pay off your credit card balance each month, if possible, so you can
avoid or minimize interest charges. Also send in your payment on time
to avoid additional fees. If you don't expect to pay your credit card
bill in full most months, consider using a card with a low interest
rate and a generous "grace period" (the number of days before the card
company starts charging you interest on new purchases).
Not taking responsibility for your finances.
Do a little comparison shopping to find accounts that match your needs
at the right cost. Be sure to review your bills and bank statements as
soon as possible after they arrive or monitor your accounts
periodically online or by telephone. You want to make sure there are
no errors, unauthorized charges or indications that a thief is using
your identity to commit fraud.
Keep copies of any contracts or other documents that describe your
bank accounts, so you can refer to them in a dispute. Also remember
that the quickest way to fix a problem usually is to work directly
with your bank or other service provider.
Final Thoughts
Even if you are fortunate enough to have parents or other loved ones
you can turn to for help or advice as you start handling money on your
own, it's really up to you to take charge of your finances. Doing so
can be intimidating for anyone. It's easy to become overwhelmed or
frustrated. And everyone makes mistakes. The important thing is to
take action.
Start small if you need to. Stretch to pay an extra $50 a month on
your credit card bill or other debts. Find two or three ways to cut
your spending. Put an extra $50 a month into a savings account. Even
little changes can add up to big savings over time.
Also remember that being financially independent doesn't mean you're
entirely on your own. There are always government agencies, including
the FDIC and the other organizations listed on Pages 10 and 11, that
can help with your questions or problems.
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