finances

Postdoc Appreciation Week: Financial Planning with Fidelity Investments

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We were joined by Dan Shea from Fidelity Investments to learn more about budgeting and financial planning!



Financial planning with Fidelity Investments

Topics to be discussed:

  • Track your expenses.
  • Know what is a discretionary vs essential spending.
  • Monitor your spending behavior.
  • Tough to save if you don’t know what you’re saving for!!
Essential expenses:
  • Mortgage
  • Food
  • Health care
Examples of discretionary expenses:
  • Travel
  • Cable TV
Make paying high-interest credit cards a priority:
  • If you have credit cards with an 8-9% interest rate it’s bad, so try to pay them as soon as possible.
  • Create a budget.
  • Avoid getting a high interest now because it compounds – you end up paying more in the future.
  • If you have more than one credit card with a high-interest rate, you can consolidate them but then make sure they get paid during the timeline that was determined for it.
  • Example: if you have a credit card with a 10% interest rate versus a card with a 15% interest rate then pay the one with the 15% interest rate first!
  • Key to your credit report is how long you’ve had your credit cards.
How much to use the credit card?
  • Doesn’t matter how much you use the credit card, as long as you pay them. Try to pay them off each month.
  • Use only 16% of what’s available of your credit. For example: if you have a $10,000 dollar credit you don’t want to have more than $1,600 in balance.
  • Too many cards could hurt your credit.
  • Monitor your savings! 
  • “Don’t keep all your eggs in one basket” – particularly important with investments.
    • Good tools:
      •  In the Fidelity Investments website to keep track of your accounts (free to set up!) – you can buy stocks through that tool.
      • Google Wallet
      • Some other tools charge $20/month to use.
How to create and manage your budget:
  • Money for essentials, unplanned emergencies and goals.
  • 50% of your take home income should go to essential spending.
Essential spending:
  • ~50% of take-home pay.
Essential savings:
  • Save 15% of pre-tax (not take-home) income.
Roth-IRA:
  • Lowers your taxable income. The younger you are and the lower your bracket is, the more sense it makes to have a Roth-IRA.
Short-term savings:
  • Save 5% of your income.
Emergency funds:
  • “Because the unexpected happens”.
  • Should save 3-6 months of essential expenses!
  • Maybe start a separate bank of money account and put in a certain amount every month ($20 or so) after you’ve paid your bad debt and covered your essential expenses.
Retirement:
  • Start saving for retirement as soon as possible! Up to 8% pre-tax income every month.
  • You don’t want to compromise your retirement savings. Compounding is key!
  • 403(b) retirement plan – can you merge your 403(b) from your old institution into a new one like Tufts? Yes (Rollover)!
  • If you take out a loan on your retirement plan, you have to pay taxes on it.
Mutual funds versus stocks

Investing:
  • Fidelity Investments is in campus twice a month on campus. 
    • October is booked, but for after October is cool – financial advice for free!!
**Pay off high debt first!**
  • Paying debt in full saves you a lot of interest.
  • The benefit of paying your debt:
    • The higher your FICO score the lower your APR is.
Credit score:
  • Student loans can actually help your score, but whether you’re good at making payments to your loan every month is what influences your standing.
Know what you’re spending on and distinguish between good debt versus bad debt.
  • Good debt: i.e. mortgage
  • Bad debt: credit cards
If making $65,000 or less, we can write down the student loan debt for tax breaks?

Housing:
  • Housing payment should be no more than 28% of your gross income.
  • The City of Boston offers a class on home owning for $25.
The order on how to use your money:
  1. Saving for emergency expenses
  2. Saving for retirement
  3. Pay/pay-off high-interest cards
  4. Pay student loans


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Ania’s guide to moving to the U S of A!

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Feel free to use this document to guide your way around the USA. Currently this document is curated from experiences that I have had, and will hopefully help you when you come to explore the great United States of America! Given my background, it is more tailored to Australian visitors, but all of the advice is applicable to other nationalities as well. 

Note: links are subject to change and may not work and this information may become dated.  
Updated: July 2016


Banking:
I would highly recommend opening up a bank that is global which exists in both your home country and the USA. A good example for Aussies is a Citibank account. Their everyday account let you take out cash from any Citibank ATM in the world with no surcharge or fee and their exchange rates are very reasonable (some of the best I have seen… and I spent months looking and comparing! See here. You can also easily transfer money almost instantaneously between AUS and USA citi accounts using their inter-citi system online for free (much cheaper then using a currency broker). 
Credit Rating:
Your credit rating in the USA is extremely important and may be used to determine whether you can rent an apartment, buy a car or take out a loan of any sort. Unfortunately, when you move to the USA, you cannot transfer your credit rate and start at zero. Luckily, you also don’t move any of your debt to the USA so often can build a good credit rating within a few years. The best way to start to do so, is to open a credit card, use it often and pay back the total sum within the due time-frame. 
Other things that matter is:
(From Consumer Finance.gov)
  • Pay your bills on time, every time. One way to make sure your payments are on time is to set up automatic payments, or set up electronic reminders. If you’ve missed payments, get current and stay current.
  • Don’t get close to your credit limit. Credit scoring models look at how close you are to being “maxed out,” so try to keep your balances low in proportion to your overall credit limit. Experts advise keeping your use of credit at no more than 30 percent of your total credit limit.
    Note: You don’t need to revolve on credit cards to get a good score. Paying off the balance each month helps get you the best scores.
  • A long credit history will help your score. Credit scores are based on experience over time. The more experience you have with getting credit and paying your bills on time, the more information there is to determine whether you are a good credit risk. Ania’s note: This tends to hurt international scholars the most, as you need a few years of good credit for it to be usable, even if you have a great score.
  • Only apply for credit that you need. Credit scores look at your recent credit activity as an indicator of your need for credit. If you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed negatively.
 Don’t forget to check your credit score regularly to ensure nothing has been falsely reported against you. You are eligible to check your score for free, once a year.


Mobile Phones:
The USA is a bit weird with mobile phones and doesn’t seem to have as much competition and therefore worse prices in Australia (apart from decent coffee and mobile phone services, everything else is cheaper!). If you have an iPhone, the problem is compounded because Apple controls all of the vendors to some degree so you won’t be able to get internet with any prepaid plan with AT&T or Verizon. The only place you can get internet prepaid is at t-mobile (which I recommend). If you are going to be staying about a month, I would suggest their prepaid deals, some of which gives you unlimited internet, phone and texts and for $10 extra you can call international landlines and text internationally as much as you want (which includes many countries). You just charge as you go and is much much cheaper than getting an international sim card. As a comparison – this is actually cheaper than going on a 24 month contract with a company – you would be paying about twice that for the same thing. Weird huh?


Goods and Services Taxes
In many states the taxes DO NOT need to be included in the displayed price on the item. To make it even more confusing, each state taxes at different rates and for different things (e.g. clothes and shoes less then $175 are not taxes in Massachusetts, otherwise its 6.25%). So just be aware that the price on the tag or shelf may not reflect the actual price at the counter!


Tipping:
I admit, I had very little clue about tipping but when you realise wait staff make as little as $5 (or less) an hour, you can appreciate why you need to tip! TripAdvisor has a good guide, but here is a quick reference (all is calculated prior to taxes):


– Sit down food (anywhere; diner or formal dinner): 15% minimum, if very good, 20%
– Taxis: 15%
– Bars (drinks): $1-2 per drink or 10-15% of bill. A lot easier to set up a tab.
– Concierge/Bell boys/Cleaning staff at hotels: $1-2
– Any personal services (makeup/hair/massage): 15-20%
Thanks!
Postdoc Scholar – Kuperwasser Lab, 2012-2016