Top Things to Know

Top Things to Know

1. Americans are loaded with credit-card debt.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

2. Some debt is good.

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

3. Some debt is bad.

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Get a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

5. Pay off your highest-rate debts first.

The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don't fall into the minimum trap.

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

7. Watch where you borrow.

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

8. Expect the unexpected.

Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

9. Don't be so quick to pay down your mortgage.

Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

10. Get help as soon as you need it.

If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.

Top Things to Know

Top Things to Know

1. Americans are loaded with credit-card debt.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

2. Some debt is good.

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

3. Some debt is bad.

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Get a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

5. Pay off your highest-rate debts first.

The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don't fall into the minimum trap.

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

7. Watch where you borrow.

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

8. Expect the unexpected.

Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

9. Don't be so quick to pay down your mortgage.

Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

10. Get help as soon as you need it.

If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.

Top Things to Know

Top Things to Know

1. Americans are loaded with credit-card debt.

The average American household with at least one credit card has nearly $10,700 in credit-card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens at any given time.

2. Some debt is good.

Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

3. Some debt is bad.

Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items so you can pay the bill in full. If there's something you really want, but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Get a handle on your spending.

Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.

5. Pay off your highest-rate debts first.

The key to getting out of debt efficiently is first to pay down the balances of loans or credit cards that charge the most interest while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don't fall into the minimum trap.

If you just pay the minimum due on credit-card bills, you'll barely cover the interest you owe, to say nothing of the principal. It will take you years to pay off your balance, and potentially you'll end up spending thousands of dollars more than the original amount you charged.

7. Watch where you borrow.

It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be dangerous. You could lose your home or fall short of your investing goals at retirement.

8. Expect the unexpected.

Build a cash cushion worth three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

9. Don't be so quick to pay down your mortgage.

Don't pour all your cash into paying off a mortgage if you have other debt. Mortgages tend to have lower interest rates than other debt, and you may deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

10. Get help as soon as you need it.

If you have more debt than you can manage, get help before your debt breaks your back. There are reputable debt counseling agencies that may be able to consolidate your debt and assist you in better managing your finances. But there are also a lot of disreputable agencies out there.

Safety Net

-Building a Financial Safety Net -

Emergency Fund, Disability, and Life Insurance

Where do you turn when you're faced with a financial emergency? Do you have money set aside to cover the unexpected expenses? Is there some sort of insurance in place? Without the right financial safety net you could find yourself in financial ruin. What good is it to earn, save, and invest money if it isn't protected in the event of a financial crisis? Learn how to create your financial safety net so you can protect what you have.

Emergency Fund

Financial advisors suggest having enough savings in an easily accessible account to cover your living expenses for at least six months in the event of illness, job loss, or other serious emergency. This is money that you should have in a savings account or other liquid account that you can tap into without penalty in the event of an emergency.

Without an emergency fund your options for paying for an unexpected expense may end up going on a credit card. That will almost certainly carry a hefty interest rate and make your situation even worse. Beyond that, many people are left with tapping into their retirement assets to pay for these emergency expenses. This is a bad idea since you could seriously put your future in jeopardy.

So, start by setting some money aside for your emergency fund. The best way to do this is to create an automatic savings plan. When you make it automatic, you don’t even realize you’re saving money and before you know it you’ve got a nice financial cushion.

Long-Term Disability Insurance

Long-term disability insurance helps replace your income if you are unable to work due to illness or injury. Many people consider this coverage a luxury, when in fact, it should be considered a necessity for those who don't have other financial resources they could tap in the event of an illness or injury. Even if you do have other financial resources, would you want to use them to pay your monthly expenses if you were to become disabled? A disability can quickly eat through all of your savings or even lead you to tap into your retirement funds which could have a significant impact down the road.

Don't think it could happen to you? Although your chances of having a disability increase as you get older, illness and injury can happen at any age. Car accidents, sports injuries, back injuries, pregnancy, and disease are just a few examples.

Ask yourself this question: could you live without your income for three months? Six months? A year? If the answer is no, you need disability insurance. Employers often offer this coverage via a payroll deduction, which may be tax-deductible. You may automatically get short-term disability coverage through our employer, but check to see if they have additional coverage options.

Life Insurance

Life insurance is necessary if you have dependents who will suffer financially if you die. Whether it’s a spouse of children, if they depend on the money you earn from your job, they need to be financial secure if you’re no longer there for them. If you have no financial dependents, life insurance isn’t completely necessary, although many people also use insurance as part of their estate planning and cash accumulation regardless of their dependent status.

If you plan to buy insurance other than term insurance provided by your employer, you should educate yourself about the pros and cons of term, whole life, and other types of insurance. You may also want to talk to an adviser about how much insurance is enough.

Summary

Once you’re created a financial cushion with your emergency savings to handle life’s unexpected expenses, protected your ability to earn an income with disability insurance, and have life insurance in place to secure your dependents’ financial security, you can sleep easier knowing that you have a financial safety net in place that can help keep you on track through even the most difficult situations.

I wish everyone the best, and hope you never need to USE your safety net. BUT STILL HAVE ONE!

Brooke

Causes of our National Debt

Causes of our National Debt

I found this essay a week ago and it has been on my mind ever since. It is about our national debt and the causes. This essay was written in 2008, so all of the statistics and numbers are out of date, but our problems are still the same. I hope this impacts you the same way it did me.

Brooke

Essay by:

Lisa Harris

Emporia State University

The U.S. today spends way more money than needed. People are spending more and more money on wants instead of needs! Individuals just want more these days. Part of the constant growing debt is from people spending all of this money, even when they don’t have it. Individuals are taking out loans more often because it is so easy. They then have trouble paying off those loans. The banks that give out these loans don’t worry about it, until now, because the government has to bail them out. Companies are spending more and not making as much, therefore they are also going into debt, and when companies and individuals go into debt they have to ask the banks for help, but if the banks are having trouble, then they are not able to help out the businesses.

Something that was a huge impact on debt was sub-prime loans. When banks would give out loans with really low interest rates, individuals thought this was good, but once the initial low interest rate period was over, interest rates rose. Once this occurred, individuals couldn’t afford their loan payments anymore and therefore started going into debt. As well as when banks would give out loans and then sell the rights to that loan to another bank, once the second bank got the loan they could do with it as they pleased. So if they decided to raise the interest rate the individual who took out the loan would be in trouble and not be able to pay the payments on that loan.

Our current national debt comes to approximately 14 trillion dollars. This has about doubled since the year 2000. It seems like the cost of everything has increased. The Median household income has risen 17 percent, from 42,000 dollars in 2000, to 49,000 dollars in 2008 (Quinn). The consumer price index has risen from 168.8 in 2000 to 220.0 in 2008; this comes to a 30 percent increase (Quinn). Consumer credit went from 1.54 trillion dollars in 2000, to 2.59 trillion dollars in 2008, this is a 68 percent increase (Quinn). The average home price has increased by 49 percent, from 139,000 dollars in 2000, to 206,500 dollars in 2008 (Quinn). These are some drastic increases in prices that affect everyone.

These days, people have to spend more money on their everyday costs of living. The price of everything seems to have risen. Individual’s everyday costs have increased since 2000. Electricity cost has risen 25 percent, it was .084 dollars per kWh in 2000, and is now .105 dollars per kWh (Quinn). Milk was 2.78 dollars per gallon in 2000, and is now 3.87 dollars per gallon in 2008. This is a 37 percent increase (Quinn). Bread 41 percent, eggs have risen an outrageous 122 percent, orange juice 40 percent, and ground beef 57 percent (Quinn). These are some of the items that people use everyday that have gone up dramatically!

The war in Iraq has also changed everything dramatically! The government has spent so much money on that war, and it’s still not over! We have lost so many soldiers in this war, which when a soldier is injured or killed, that is another increase in cost, from hospital costs, to costs to send out a new soldier in their place! As of 2008 to date, we have spent approximately 600 billion dollars on this war! We should not need to spend near that much!

Since 1975 our federal debt has risen from 542 billion dollars to more than 9 trillion dollars (Quinn). Showing debt as a percentage of GDP, it is now at 60 percent when it was at 35 % (Quinn). Our tax dollars are going into things that we don’t have hardly any control over and we don’t see changing. Approximately 27 percent goes into the military whether we support the war or not (Quinn). 21 percent into health care (Quinn). 19 percent goes just into paying off the debt (Quinn). 12 percent into other stuff (Quinn). 6 percent goes into income security (Quinn). 5 percent, into education which I personally think this should be a lot more (Quinn). 3 percent into Veterans benefits (Quinn). 3 percent goes into nutrition (Quinn). 2 percent goes into housing (Quinn). 2 percent has gone into the environment (Quinn). And only 0.3 percent into job training (Quinn). So as you can see, instead of our tax dollars going towards things that affect us from housing to education. The government is spending it on things that they need it for. 


All of these things are some causes of why our national debt is so bad. Our inflation is sky high now because of this and we are on the edge of a recession, if not already in one. Individuals, as well as businesses need to start cutting back on everything they are spending and stick to the essential needs.

Works Cited

Quinn, James. America’s Fiscal Crisis: Tough Decisions Needed Now. Seeking Alpha. August 17, 2008. http://seekingalpha.com/article/91274-america-s-fiscal-crisis-tough-decisions-needed-now.

Bank VS Credit Union

Credit Union Vs. Bank:

Which is Best for You?

Everyone needs a place to store their money, and unless you plan on keeping it under your mattress or in the cookie jar, you’ll need to have an account with either a bank or a credit union. Aside from providing a safe place to store your assets, financial institutions also provide other benefits, such as a place to cash your checks, obtain money orders and wire funds.

A popular misconception is that a bank is the same thing as a credit union, but in reality, they are as different as night and day. Choosing between a bank and a credit union should reflect your own personal self interest, and should be decided after examining your particular financial situation.

Banks are the most popular financial institutions. Most are run by a group of investors who have a large amount of capital, which goes into the funding for the bank. Some are nationwide, while others are smaller, local institutions. Either way, a bank’s primary purpose is to make money for the investors and for the stock holders.

Banks are federally insured by the Federal Deposit Insurance Corporation. A paid Board of Directors makes all of the decisions for the bank, which are usually profit-driven and hold little benefit for the customers of the bank. Anyone, in any city or state, can open an account with a bank, and customers hold no voting privileges or decision-making power within the institution.

Credit unions, on the other hand, are designed to serve a particular group or neighborhood. People who use credit unions for their financial services are members of the credit union, rather than customers. Since credit unions are not-for-profit organizations, the profits incurred by the credit union directly benefit the members after covering overhead costs.

Credit unions are insured by the National Credit Union Administration, and are democratically controlled by the members. This means that members have more say in how the credit union is run, and hold decision-making power. Members elect a Board of Directors – rather than hiring one – who are chosen to fully represent the members in making decisions and upholding policies.

Many people choose credit unions over banks because the former allows for lower interest rates and low-cost services. They like the fact that they are treated as a benefit to the institution, rather than “just another account number”. The more members who deposit money into a credit union, the higher the benefits to the existing members. Credit unions are also tax-exempt.

In the past, credit unions have offered a limited range of resources, which included only low-interest loans and savings accounts. They have recently begun to expand their services to include checking accounts, IRA’s and credit cards. Some have also begun to diversify in the types of loans that they offer. Many credit unions worldwide offer student loans, small business loans and mortgages.

Banks, however, do offer a wider range of services, and are often more accessible to customers. For example, if you have an account with a branch of Wells Fargo in Texas, you can access that same account at branches and ATM’s in Michigan. This makes travel easier for many people.

Many companies – from small businesses to large corporations – have “adopted” credit unions as their source for maintaining IRA’s and pensions for employees. This is universally beneficial because it makes the company’s job much simpler, rather than having to deal with multiple institutions, and the employees are not only members of the credit union, but also owners, as all members of credit unions own a small share of the institution.

If you have a bank account a traditional bank and an IRA account with a credit union, you might be enjoying the best of both worlds. You can obtain the benefits of the credit union while still retaining access to the diversity of your bank.

Since credit union members usually have higher interest rates on savings accounts, you might also want to open a savings account with your credit union, while leaving your checking account with a traditional bank. Most credit unions offer ATM cards along with savings account for member convenience.

A current trend among banks, which is sending more people to credit unions, lies in the charging of monthly fees. For example, if you have a checking account with Bank of America, you will be charged a monthly maintenance fee unless you have direct deposit from your employer or maintain a specified balance.

With a credit union, this isn’t an issue. Since credit unions aren’t in the business of making money as not-for-profit organizations, they don’t charge the high fees and finance charges of traditional banks.

To find information about credit unions in your area, go to your local phone directory. Locate credit unions that are close to your home, and visit to learn more. Financial decisions should be based upon informed research of all options, and you might find that a credit union could be saving you money.

Likewise, if you know that you will be needing a monetary loan in the next several months, you might want to look into opening an account with a credit union. It will be easier to secure a loan if you are already a member, and the interest payments will be significantly lower than with a traditional banking center.

Whichever you choose – a bank or a credit union – make smart decisions with your money and be sure that you’re getting the most out of your banking institution.

Credit Card Blocking

Credit Card Blocking

Have you been traveling lately? Do you have an unexplainable “over the limit” fee? It is possible that your credit card was “blocked” and you didn’t even know it!

Credit card blocking occurs when a merchant contacts your credit card company with an estimate of what your total bill will be and "blocks" that amount even though he isn't charging your card for the total amount at that time and might not ever charge your card for that amount.

An example of a situation where credit card blocking occurs is when you use a credit card to register with a hotel or car rental service. They call in an estimate of what your total bill might be to your credit card issuer and have that amount set aside or blocked for possible future use. This way you can't stiff them on the final bill later on.

While an amount has been blocked it cannot be used to make other purchases. So, if you leave your hotel room to go shopping, you might find your credit card declined on the basis that you have reached your credit limit.

Some credit card companies will let you go over your limit and then access an "over the limit" fee on your next statement. These fees are heavy and you want to avoid them if at all possible.

For the above reason, it is not a good idea to use a credit card that you have nearly maxed out when you travel.

WAYS TO FIGHT BACK AGAINST CREDIT CARD BLOCKING

--Avoid punitive fees by calculating how much will be blocked from your credit card and make sure you don't exceed your credit limit.

--Use two different credit cards when you travel: one with lots of available credit to use when you expect amounts will be blocked; the other card for everything else.

--Ask the hotel / car rental clerk how long the card will be blocked. Pay your final bill with the same credit card you used to initiate the service. This way the block will be removed within two days of your paying the final bill.

--Ask your credit card issuer how long they block credit lines.

Finding Teen Balance

How to Balance

Work and SCHOOL

Let's be honest. In today's teen world, life can be expensive. Trendy clothes, concert tickets, car payments, cell phone bills and the latest electronic gadgets can be costly. You could pile on the work hours to afford everything. But is that smart? Do those extra hours at work put your long-term earning power at risk?

One thing is clear. It pays to succeed in school (literally). We know. We sound like your parents (lame). But let’s take a look at some quick facts.

Diplomas = Dollars

High school graduates earn about $7,000 more each year on average than those who don’t finish high school. After 40 years, that adds up to more than $200,000 in extra earnings!

College graduates with bachelor’s degrees earn $16,000 more each year on average than those who earn a high school diploma. After 40 years, that’s a difference of $900,000. That’s almost a million bucks!

Scholars Win Scholarships

Most college scholarships give “free money” to students who have excellent grades in challenging courses and who are active in a few school or community organizations. Teens that choose to spend their time flipping burgers rather than taking and studying for Honors and Advanced Placement courses are closing the door to opportunities for saving BIG money in college. Plus, they are very likely costing themselves earning power over a lifetime.

Working That Works

Sure, iPods and new cars don’t pay for themselves. So what’s a system for work that works?

• The 10-Hour Technique – The National Institute for Work and Learning in Washington, D.C., recommends that teens should work only 10 hours a week, with most of those hours falling on the weekend.

• Summertime is the Right Time – Want to supersize your paycheck? During the summer, you can jump head-first into a job without worrying about skipping schoolwork.

Ways to Invest

Ways to Invest

There are many ways to invest your money. Before you invest, think about these factors:

• Safety – how risky is it?

• Liquidity – can you easily get your money out of the investment?

Return on the investment – what's your earning potential?

Certificates of Deposit (CD’s)

You can buy Certificates of Deposit (CDs) at banks. They're called CDs because when you deposit your money, the bank gives you a certificate telling you –

• the amount you have deposited

• the interest rate being paid

• how long the money must remain in the account

Certificates of Deposit pay slightly higher interest rates than savings accounts. There are many kinds of CDs. They pay different rates, and they require different lengths of time you must keep your money in them. So if you decide to look into CDs, you have lots of choices.

Safety

Bank CDs are FDIC-insured. Just like a savings account, your money is protected. To learn about how safety and interest rates affect each other, look at the Risk/Reward Pyramid.

Liquidity

Money you invest in a CD is less liquid than the money you put in a savings account. With a CD, you are not free to take your money out whenever you want. You must invest your money for a specific time: 3 months, 6 months, 1 year, 5 years. The time all depends on the CD you choose. Yes, you can withdraw your money earlier, but then you must pay a penalty.

Return

The longer the CD's deposit time, the higher the interest rate. Another word for interest rate is return.

Interest rates on bank CDs are fixed – the rate cannot change for as long as you own the CD. Typically, a CD rewards you with compound interest. That means the interest you've already earned also earns interest. Your money really multiplies. Check out the Compounding Calculator.

Required amounts

To invest in a CD, you have to invest a certain amount – the higher this amount, the more interest the CD will pay.

Money Market Accounts

This is a kind of savings account offered by a bank or brokerage company. Because you must deposit a required amount in the account, money market accounts usually pay more interest than a regular savings account.

Safety

The FDIC insures bank money market accounts, so if you have under $100,000 in your account, your money is safe.

Liquidity

Unlike a CD, you may withdraw money at any time. In fact, most bank money market accounts come with checkbooks. You may write a few checks each month to make purchases or pay bills. However, money market accounts are not meant to be a checking account.

Return

There is no fixed interest rate. Interest floats up and down from day to day, but it usually earns more than a regular savings account.

Requirements

Unlike a savings account, you usually have to deposit a certain amount of money to get one of these accounts. Sometimes you also have to keep a certain amount in the account.

U.S. Bonds

When you buy U.S. bonds, you're lending money to the federal government. Bonds were used during World War I and II as a way for the federal government to raise money for fighting the wars. Still popular today, U.S. bonds can be purchased at banks.

Two kinds of U.S. Bonds

• EE Bonds. These are discount bonds. When you buy these bonds, you pay only half their "face value", the value printed on the bond. So, for example, you pay $50 for a $100 bond. Each year that you keep the bond, its value increases as interest adds up. Even after the bond reaches the value printed on it, the bond will continue to earn interest. Bonds earn interest for 30 years from the date they were issued.

• I Bonds. These bonds are sold at their face value ($50 for a $50 bond). They earn interest and can be cashed in to pay for college. They are tax-free. Interest rises and falls – every six months, interest rates change.

Safety

The money you invest in bonds is backed by the full faith and credit of the federal government.

Liquidity

How free are you to take your money out? This is long-range investing. Your money is tied up for years.

Return

Interest rates are lower than some other investments because there's lower risk with bonds.

Mutual Funds

These funds combine the money of many investors to buy many kinds of investments, like stocks, bonds, real estate, etc. Index mutual funds invest in companies that are part of a published index like the Standard & Poor's 500. In a mutual find, a fund manager trades the fund’s underlying securities to realize a gain or a loss and collects dividends or interest income.

Safety

There is risk because no one insures your investment. If the price of the fund drops, you lose money. But mutual funds can be safer than individual stocks. Why? You are spreading your money around in a mutual fund – diversifying. Buying lots of different stocks and bonds lowers your risk. The theory is that if one investment drops, the other stocks and bonds will hold their value or do well enough to make up for the loss.

Liquidity

With mutual funds, you have freedom. You can withdraw any or all of your money at any time. However, at the time you sell your shares (the number of units you own in the fund), you are paid what the shares are worth that day – calculated at the end of the trading day. Their worth may be higher or lower than what you paid for them.

Return

Mutual funds are professionally managed by fund managers with lots of experience investing money. They bring wisdom to what and when the fund buys and sells. As experts, they are taking care of your money, and their past performance can be measured. But you have to remember that their past performance does not guarantee success in the future.

Fees

Mutual funds need money to operate – to pay the fund managers and to do business. The fund gets this money by charging fees to anyone who invests in the fund. Think of it as paying "dues" to belong to the fund.

Stocks

Safety

With stocks, there's no FDIC to protect you against losses. No compound interest. You're on your own. Your stock can rise like a rocket or drop like a stone – or grow steadily.

Liquidity

You can sell your stocks at any time. BUT when you sell, you sell them for what they are worth at that moment. If that's more than you paid for them, you've earned money. If the price of your stock has fallen since you bought it, you'll be losing money if you sell it.

Return dividends

This is a payment made by a company to a stockholder to share in the company's profits. Dividends are paid according to how many shares you own – for example, a dollar a share. Dividends can be paid in cash, but they can also be "paid" in the form of additional stock that is automatically re-invested in the company. Dividends are usually paid quarterly.

Appreciation

If your stock appreciates, that means the price of your shares (units) rises in value. So each share of your stock is worth more than it was before. You "realize" (obtain) this gain only after you sell the stock. Companies and shareholders want stocks to appreciate, but only up to a point. Why? Read on.

Splitting

If shares cost too much, they are less attractive to people shopping for good stock. As a shareholder, you want to encourage more people to buy shares of your stock. The company feels the same way. So when a stock has reached a high dollar value, the company may split the shares, lowering the per-stock price. Splitting encourages more investors to buy. Splitting actually means reducing a stock's price but increasing the number of shares each shareholder owns. Here's how it works.

You may have 100 shares. You paid $30 each for them several years ago. Now they're worth $60 each. The company splits the shares two-for-one, which means you now own twice as many shares (200) but each is now worth $30. The amount of your investment hasn't changed. True, your shares are only worth half their former price, but you now own twice as many shares. By splitting, the company has made shares affordable again.

Collectibles

These are items you buy, hold onto, and hope they'll be worth more someday because they're rare.

Want some examples? Baseball cards, action figure dolls, coins, stamps, comics, antique toys, furniture, and art. These are only some of the things that people collect, hoping that, in the future, a buyer will pay a high price for them.

Safety

Collecting may sound like more fun than other kinds of investing, but there are absolutely no guarantees 1) that the item will grow in value 2) that anyone will want to buy it.

Collecting can be very risky – especially if you pay a high price for things you decide to collect, for example, rare coins. While collectibles can increase in value, they can also decrease.

Liquidity

Once you've invested in collectibles, the only way to get your money back is to find a buyer willing to pay the price. Therefore, you may not be able to get your money back when you want it. What happens if you can't find a buyer who is interested? Or what happens if a buyer won't pay you at least the price you paid for the collectible? You're out of luck.

Return

Like stocks, you're betting your collections will appreciate. But there's no interest or dividends to rely on. Collecting is a long-term investment, so you must be patient.

Brooke

Credit Card Facts

Credit Card FACTS

Fast facts you need to know.

Credit limit

A credit card company set limits on how much you can charge on your card. This limit is based on your ability to handle debt.

Paying the minimum monthly payment

Bad idea. After you subtract the minimum payment from your balance, finance charges will be added to your remaining balance. These charges add up month after month. You can dig yourself into a hole real fast.

Know this too: the minimum payment is the LEAST amount you can pay to keep the card active. If you pay less, your card will be deactivated (turned off).

Grace period

If you pay your bill in full during the grace period, you won’t have to pay a finance charge on purchases for that bill. A grace period is usually about 25 days.

Late fees

If you don’t pay your bill by the due date (the date your grace period expires), you will be charged a late fee. These can be as high as $35! Get yourself organized to pay on time. Paying late is costly.

Interest rates

Remember: when you use your credit card, you’re borrowing money. So you will be charged interest whenever you don’t pay your bill in full. With a credit card, you are paying for convenience. Credit card rates can be 18% or as high as 24% depending on your credit history.

“Secured” credit cards

Some banks offer secured credit cards to people with a poor credit history or no credit history at all. Secured cards can be the best option for your first credit card. The card is “secured” with a cash balance, a savings account, for example. You cannot touch this balance, or the card will be deactivated (turned off). If you charge over your limit, the bank can take the balance from your account. Your account acts like collateral for a loan. These cards may charge higher interest rates, but they offer the convenience of using a credit card while you build a good credit history.

Your credit card is lost or stolen

You must notify your credit-card company as soon as you know your card has been stolen or used without your permission. If you do, you will be responsible for only the first $50 of unauthorized charges. These days, thieves can steal your credit card number — they don’t need the actual card. Always know where your card is, and keep all your receipts.

Debit cards do not offer the same protection as credit cards. (Some credit card companies offer debit cards with some protection.) Most debit cards work like writing a check — the money is immediately taken out of your account. If you do not report a false charge or charges within 60 days of receiving your bank statement, you could be held responsible for the false charges. Be sure you understand the details when you sign up for a debit card.

Credit reports

As you enter the adult world of work, you begin to build a credit history — a record of your borrowing and paying habits.

Advantages of Credit Cards

Credit Cards give you lots of advantages.

A safe alternative to cash

When you have your card in your wallet, you don't have to carry cash that can be lost or stolen. If your credit card is lost or stolen, you can report the missing card to the card company. The company will then stop accepting any charges on your card. What's more, you won't be charged for purchases made by someone else. If you make a purchase with a credit card and do not get what you paid for, the credit card company will help you solve your problem.

Builds a good credit history

If you use your card responsibly, you can begin to build a good credit rating for yourself. Later in life, when you need a loan, a lender will want proof that you pay your debts. A good credit card history will help you get your loan. A poor credit history will work against you. Employers look at your credit history, too.

Bails you out of emergencies

Face it: if you suddenly have to put $400 of repairs into your car, a credit card will come in real handy. Emergencies do happen.

Gives you time to pay

Depending on when you make your purchase and when your monthly bill is due, you can get extra time to save up and pay for what you just charged. If you can pay off the bill ENTIRELY, you are really making the credit card work for you.

Disadvantages of Credit Cards

The real problem with credit cards is how easy they are to use!

Way too tempting

It is so easy. It doesn't even feel like you're spending money. Do that enough times in a month, and SURPRISE! Look at that credit card balance! Where did it come from? It came from all those not-so-big purchases you made over the month –

• That pair of shoes you just couldn't pass up. $79

• The night you were dying for pizza after you'd gone rock climbing. $24

• That great sale! What did I buy? $65

• Those two new music CDs that you just couldn't live without. $29

Suddenly you're in debt. And you don't have the $197. So you pay $60, all you can afford. What happens next month? The $60 you paid the credit card company has made you short on cash this month — so you charge more, and your debt grows larger.

Carrying a balance

You may intend to always pay your bill in full and on time. The plain fact is that most of us carry a balance (owe money) from month to month. The convenience of credit can be very hard to resist.

Getting out of debt

So what's it like to be in debt? Let's say that you find the perfect winter jacket. What luck! It's marked down from $220 to $180. That's a $40 savings. You don't have the $180 right now, but you hate to pass up the sale, so you charge the jacket. You decide to pay for it over time.

Because you work only one day a week, you can't afford large monthly payments. But you can pay $15 every month and still have some money left over for other things. You faithfully pay the $15 each month, but the months seem to drag on forever. Plus, you pay late once, and you're charged a $30 late fee for missing the payment date.

Although you've bought the winter jacket in November, it takes you 16 months (that's two winters, a summer, and a spring) to pay off the purchase! At a 17.9% interest rate and with a $30 penalty fee, guess how much you paid for that "sale" jacket? $228.26. That's more than the original price! Those finance charges really add up.