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!!
- Health care
- Cable TV
- 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.
- 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.
- Money for essentials, unplanned emergencies and goals.
- 50% of your take home income should go to essential spending.
- ~50% of take-home pay.
- Save 15% of pre-tax (not take-home) income.
- Lowers your taxable income. The younger you are and the lower your bracket is, the more sense it makes to have a Roth-IRA.
- Save 5% of your income.
- “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.
- 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.
- Fidelity Investments is in campus twice a month on campus.
- October is booked, but for after October is cool – financial advice for free!!
- 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.
- 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.
- Good debt: i.e. mortgage
- Bad debt: credit cards
- Housing payment should be no more than 28% of your gross income.
- The City of Boston offers a class on home owning for $25.
- Saving for emergency expenses
- Saving for retirement
- Pay/pay-off high-interest cards
- Pay student loans
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.
(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.