1. What exactly is a mutual fund?

A mutual fund pools money from hundreds and thousands of investors to construct a portfolio of stocks, bonds, real estate, or other securities, according to its charter. Each investor in the fund gets a slice of the total pie.

2. Mutual funds make it easy to diversify.

Most funds require only moderate minimum investments, from a few hundred to a few thousand dollars, enabling investors to construct a diversified portfolio much more cheaply than they could on their own.

3. There are many kinds of stock funds.

The number of categories is dizzying. Some examples: growth funds, which buy shares of burgeoning companies; sector funds, which buy shares of companies in a particular sector, such as technology or health care; and index funds, which buy shares of every stock in a particular index, such as the S&P 500.

4. Bond funds come in many different flavors too.

There are bond funds for every taste. If you want safe investments, consider government bond funds; if you’re willing to gamble on high-risk investments, try high-yield bond funds, also known as junk bond funds; and if you want to keep down your tax bill, try municipal bond funds.

5. Returns aren’t everything – also consider the risk taken to achieve those returns.

Before buying a fund, look at how risky its investments are. Can you tolerate big market swings for a shot at higher returns? If not, stick with low-risk funds. To assess risk level, check these three factors: the fund’s biggest quarterly loss, which will help you brace for the worst; its beta, which measures a fund’s volatility against the S&P 500; and the standard deviation, which shows how much a fund bounces around its average returns.

6. Low expenses are crucial.

In order to cover their expenses – and to make a profit – funds charge a percentage of total assets. At no more than a few percentage points a year, expenses may not sound substantial, but they create a serious drag on performance over time.

7. Taxes take a big bite out of performance.

Even if you don’t sell your fund shares, you could still end up stuck with a big tax bite. If a fund owns dividend-paying stocks, or if a fund manager sells some big winners, shareholders will owe their share of Uncle Sam’s bill. Investors are often surprised to learn they owe taxes – both for dividends and for capital gains – even for funds that have declined in value. Tax-efficient funds avoid rapid trading (and high short-term capital gains taxes) and match winning trades with losing trades.

8. Don’t chase winners.

Funds that rank very highly over one period rarely finish on top in later ones. When choosing a fund, look for consistent long-term results.

9. Index funds should be a core component of your portfolio.

Index funds track the performance of market benchmarks, such as the S&P 500. Such “passive” funds offer a number of advantages over “active” funds: Index funds tend to charge lower expenses and be more tax efficient, and there’s no risk the fund manager will make sudden changes that throw off your portfolio’s allocation. What’s more, most active mutual funds underperform the S&P index.

10. Don’t be too quick to dump a fund.

Any fund can – and probably will – have an off year. Though you may be tempted to sell a losing fund, first check to see whether it has trailed comparable funds for more than two years. If it hasn’t, sit tight. But if earnings have been consistently below par, it may be time to move on.

The above post is from the CNN Money series called “Money 101.” See the rest of lesson 6 here.

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1. Stocks aren’t just pieces of paper.

When you buy a share of stock, you are taking a share of ownership in a company. Collectively, the company is owned by all the shareholders, and each share represents a claim on assets and earnings.

2. There are many different kinds of stocks.

The most common ways to divide the market are by company size (measured by market capitalization), sector, and types of growth patterns. Investors may talk about large-cap vs. small-cap stocks, energy vs. technology stocks, or growth vs. value stocks, for example.

3. Stock prices track earnings.

Over the short term, the behavior of the market is based on enthusiasm, fear, rumors and news. Over the long term, though, it is mainly company earnings that determine whether a stock’s price will go up, down or sideways.

4. Stocks are your best shot for getting a return over and above the pace of inflation.

Since the end of World War II, through many ups and downs, the average large stock has returned close to 10% a year — well ahead of inflation, and the return of bonds, real estate and other savings vehicles. As a result, stocks are the best way to save money for long-term goals like retirement.

5. Individual stocks are not the market.

A good stock may go up even when the market is going down, while a stinker can go down even when the market is booming.

6. A great track record does not guarantee strong performance in the future.

Stock prices are based on projections of future earnings. A strong track record bodes well, but even the best companies can slip.

7. You can’t tell how expensive a stock is by looking only at its price.

Because a stock’s value depends on earnings, a $100 stock can be cheap if the company’s earnings prospects are high enough, while a $2 stock can be expensive if earnings potential is dim.

8. Investors compare stock prices to other factors to assess value.

To get a sense of whether a stock is over- or undervalued, investors compare its price to revenue, earnings, cash flow, and other fundamental criteria. Comparing a company’s performance expectations to those of its industry is also common — firms operating in slow-growth industries are judged differently than those whose sectors are more robust.

9. A smart portfolio positioned for long-term growth includes strong stocks from different industries.

As a general rule, it’s best to hold stocks from several different industries. That way, if one area of the economy goes into the dumps, you have something to fall back on.

10. It’s smarter to buy and hold good stocks than to engage in rapid-fire trading.

The cost of trading has dropped dramatically — it’s easy to find commissions for less than $10 a trade. But there are other costs to trading — including mark-ups by brokers and higher taxes for short-term trades — that stack the odds against traders. What’s more, active trading requires paying close attention to stock-price fluctuations. That’s not so easy to do if you’ve got a full-time job elsewhere. And it’s especially difficult if you are a risk-averse person, in which case the shock of quickly losing a substantial amount of your own money may prove extremely nerve-wracking.

The above post is from the CNN Money series called “Money 101.” See the rest of lesson 5 here.

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1. Over the long term, stocks have historically outperformed all other investments.

From 1926 to 2010, the S&P 500 returned an average annual 9.8% gain. The next best performing asset class is bonds. Long-term U.S. Treasurys returned, on average, 5.4% over the same period.

2. Over the short term, stocks can be hazardous to your financial health.

On Dec. 12, 1914, stocks experienced the worst one-day drop in stock market history — 24.4% . Oct. 19, 1987, the stock market lost 22.6%. More recently, the shocks have been prolonged and painful: If you had invested in a Nasdaq index fund around the time of the market’s peak in March 2000 you would have lost three-fourths of your money over the next three years. And in 2009, stocks overall lost a whopping 37%.

3. Risky investments generally pay more than safe ones (except when they fail).

Investors demand a higher rate of return for taking greater risks. That’s one reason that stocks, which are perceived as riskier than bonds, tend to return more. It also explains why long-term bonds pay more than short-term bonds. The longer investors have to wait for their final payoff on the bond, the greater the chance that something will intervene to erode the investment’s value.

4. The biggest single determiner of stock prices is earnings.

Over the short term, stock prices fluctuate based on everything from interest rates to investor sentiment to the weather. But over the long term, what matters are earnings.

5. A bad year for bonds looks like a day at the beach for stocks.

In 1994, the worst year for bonds in recent history, intermediate-term Treasury securities fell just 1.8%, and the following year they bounced back 14.4%. By comparison, in the 1973-74 crash, the Dow Jones industrial average fell 44%. It didn’t return to its old highs for more than three years or push significantly above the old highs for more than 10 years.

6. Rising interest rates are bad for bonds.

When interest rates go up, bond prices fall. Why? Because bond buyers won’t pay as much for an existing bond with a fixed interest rate of, say, 5% because they know that the fixed interest on a new bond will pay more because rates in general have gone up.

Conversely, when interest rates fall, bond prices go up in lockstep fashion. And the effect is strongest on bonds with the longest term, or time, to maturity. That is, long-term bonds get hit harder than short-term bonds when rates climb, and gain the most when rates fall.

7. Inflation may be the biggest threat to your long-term investments.

While a stock market crash can knock the stuffing out of your stock investments, so far — knock wood — the market has always bounced back and eventually gone on to new heights. However, inflation, which has historically stripped 3.2% a year off the value of your money, rarely gives back what it takes away. That’s why it’s important to put your retirement investments where they’ll earn the highest long-term returns.

8. U.S. Treasury bonds are as close to a sure thing as an investor can get.

The conventional wisdom is that the U.S. government is unlikely ever to default on its bonds – partly because the American economy has historically been fairly strong and partly because the government can always print more money to pay them off if need be. As a result, the interest rate of Treasurys is considered a risk-free rate, and the yield of every other kind of fixed-income investment is higher in proportion to how much riskier that investment is perceived to be. Of course, your return on Treasurys will suffer if interest rates rise, just like all other kinds of bonds.

9. A diversified portfolio is less risky than a portfolio that is concentrated in one or a few investments.

Diversifying — that is, spreading your money among a number of different types of investments — lessens your risk because even if some of your holdings go down, others may go up (or at least not go down as much). On the flip side, a diversified portfolio is unlikely to outperform the market by a big margin for exactly the same reason.

10. Index mutual funds often outperform actively managed funds.

In an index fund, the manager sets up his portfolio to mirror a market index — such as Standard & Poor’s 500-stock index — rather than actively picking which stocks to purchase. It is surprising, but true, that index funds often beat the majority of competitors among actively managed funds. One reason: Few actively managed funds can consistently outperform the market by enough to cover the cost of their generally higher expenses.

The above post is from the CNN Money series called “Money 101.” See the rest of lesson 4 here.

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A bank is one of the safest places to stash your cash. In an effort to shore up consumer confidence during the credit crunch of 2008, the federal government said it would temporarily insure accounts against loss by up to $250,000 per depositor. After January 1, 2014, the standard insurance of up to $100,000 per depositor returns, excluding certain retirement accounts, which will remain at $250,000 per depositor.

2. You pay for the convenience of a bank account.

Banks pay lower rates on interest-bearing accounts than brokerages and mutual fund companies that offer check-writing privileges. What’s more, bank fees can be high — account costs can easily add up to $200 a year or more unless you keep a minimum required balance on deposit.

3. Inflation can eat what you earn from a bank.

Even at a low rate of inflation, the annual creep in the cost of goods and services usually outpaces what banks pay in interest-bearing accounts.

4. Not all interest rates are created equal.

Banks frequently use different methods to calculate interest. To compare how much money you’ll earn from various accounts in a year, ask for each account’s “annual percentage yield.” Banks typically quote both interest rates and APYs, but only APYs are calculated the same way everywhere.

5. You can get better rates

Certificates of deposit (CDs) offer some of the best guaranteed rates on your money and are insured up to $250,000 each. As with all other deposits, insurance will return to the standard $100,000 in 2014.

The catch: you have to lock up your money for three months to five years or more. If interest rates fall before the CD expires, the bank is out of luck and must give you the rate it quoted. If rates climb, you’re stuck with the lower rate.

Also with rising interest rates, money market accounts can become an attractive option, too. They pay more than banking accounts and you don’t have to lock up your money for a specific amount of time.

6. ATM fees can take a significant bite out of your budget.

The convenience of using automated teller machines is an increasingly pricey one.On average, the fee your bank charges you to use another institution’s ATM is $1.32, according to a Bankrate.com survey in 2009. That’s on top of the average $2.22 that the other institution will charge you to use its ATM.

7. Getting the best deal takes work.

You won’t get a great deal on a car if you just walk into a dealer and plunk your money down. Likewise, you won’t get a great banking deal unless you comparison-shop and ask about price breaks. For example, a bank might offer free checking if you are a shareholder or if you direct deposit your paycheck.

8. Use the Internet to shop for bank services.

You can use the Internet to compare fees, yields, and minimum deposit requirements nationwide. Sites like Bankrate.com allow you to search and compare the highest yields and the lowest costs on banking, savings, loans and deposit rates nationwide. You can also search by geographic location or use CNNMoney.com loan center.

9. Banking online can make bill-paying easier.

Electronic bill-paying can save you the monthly hassle of paying your bills. And if you couple online banking with a personal-finance management program, such as Quicken or Microsoft Money, you’ll be able to link your banking with your budgeting and financial planning as well. But be careful. Some vendors only warn the consumer of price hikes in the fine print of a bill.

10. You can bank without a bank.

A number of financial institutions offer accounts that resemble bank services. The most common: Credit union accounts; mutual fund company money market funds; and brokerage cash-management accounts.

The above post is from the CNN Money series called “Money 101.” See the rest of lesson 3 here.

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1. Budgets are a necessary evil.

They’re the only practical way to get a grip on your spending – and to make sure your money is being used the way you want it to be used.

2. Creating a budget generally requires three steps.

• Identify how you’re spending money now.
• Evaluate your current spending and set goals that take into account your long-term financial objectives.
• Track your spending to make sure it stays within those guidelines.

3. Use software to save grief.

If you use a personal-finance program such as Quicken or Microsoft Money, the built-in budget-making tools can create your budget for you.

4. Don’t drive yourself nuts.

One drawback of monitoring your spending by computer is that it encourages overzealous attention to detail. Once you determine which categories of spending can and should be cut (or expanded), concentrate on those categories and worry less about other aspects of your spending.

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1. Narrow your objectives.

You probably won’t be able to achieve every financial goal you’ve ever dreamed of. So identify your goals clearly and why they matter to you, and decide which are most important. By concentrating your efforts, you have a better chance of achieving what matters most.

2. Focus first on the goals that matter.

To accomplish primary goals, you will often need to put desirable but less important ones on the back burner.

3. Be prepared for conflicts.

Even worthy goals often conflict with one another. When faced with such a conflict, you should ask yourself questions like: Will one of the conflicting goals benefit more people than the other? Which goal will cause the greater harm if it is deferred?

4. Put time on your side.

The most important ally you have in reaching your goals is time. Money stashed in interest-earning savings accounts or invested in stocks and bonds grows and compounds. The more time you have, the more chance you have of success. Your age is a big factor – younger people (who have more time to build their nest egg) can invest differently than older ones. Generally, younger people can take greater risks than older people, given their longer investment horizon.

5. Choose carefully.

In drawing up your list of goals, you should look for things that will help you feel financially secure, happy or fulfilled. Some of the items that wind up on such lists include building an emergency fund, getting out of debt and paying kids’ tuitions. Once you have your list together, you need to rank the items in order of importance.

6. Include family members.

If you have a spouse or significant other, make sure that person is part of the goal-setting process. Children, too, should have some say in goals that affect them.

7. Start now.

The longer you wait to identify and begin working toward your goals, the more difficulty you’ll have reaching them. And the longer you wait, the longer you postpone the advantage of compounding your money.

8. Sweat the big stuff.

Once you have prioritized your list of goals, keep your spending on course. Whenever you make a large payment for anything, ask yourself: “Is this taking me nearer to my primary goals – or leading me further away from them?” If a big expense doesn’t get you closer to your goals, try to defer or reduce it. If taking a grand cruise steals money from your kids’ college fund, maybe you should settle for a weekend getaway.

9. Don’t sweat the small stuff.

Although this lesson encourages you to focus on big-ticket, long-range plans, most of life is lived in the here-and-now and most of what you spend will continue to be for daily expenses – including many that are simply for fun. That’s OK – so long as your long-range needs are taken into consideration.

10. Be prepared for change.

Your needs and desires will change as you age, so you should probably reexamine your priorities at least every five years.

The above post is from the CNN Money series called “Money 101.” See the rest of lesson 1 here.

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Financial literacy...not just for bookworms

In a recent report referenced by Southern Methodist University, in a study called “Economic Factors and the Debt Management Industry” by Richard Briesch PhD, 41 percent of households give themselves a C, D, or F in financial literacy.

That’s not good.

What’s your level of financial literacy?

1. 57 percent of households do not have a budget. DMB Financial starts every engagement with clients by jointly developing a budget. Knowing where you are, where you begin, is the first step towards better financial literacy.
2. 32 percent of households admit they have no savings. DMB Financial helps you set up an independent savings account at an FDIC insured institution. This is your savings account. It holds your savings. Creating a savings mechanism is a critical. It gives you the tools to make good financial decisions. You have a budget and, over time, develop a healthy savings amount. Now you just have to put that plan into action.
3. 77 percent of households admit they’re saving less this year than they saved last year. Even in tough economic times, with a good budget and the right savings plan, you can improve your savings situation over last year. The average DMB Financial client is saving over $700 a month by the time they graduate our debt settlement program! That’s amazing, especially considering the average income is around $50,000 a year.
4. There is no long-term plan for wealth creation. Rich people have financial plans, investments, and advisors. Are financial plans, investments, and advisors only for rich people? Or, are those people rich because they have a financial plan, investments, and advisors! Many graduating DMB Financial clients transition to our partner’s financial planning services. They start retirement savings, college funds, and some even start buying stocks and bonds. In just a few short years they go from being buried in debt to having a plan that gets them to $100,000 in the bank or more. Hello retirement. Hello paying for kids’ college. Hello new home.

Financial literacy isn’t something just for the rich and famous. DMB Financial enters every client into its 36-month financial literacy series of email newsletters. We partner with a major financial planning service. They provide our clients with free financial planning consultations to help identify their goals, their dreams, and put a plan in place to reach them.

Get out of debt. Then create wealth. Come join the financial literate!

—————————————————————-

For a free debt analysis and preliminary budget, call a Program Consultant at (866) 869-6959. You’ve got nothing to lose, except the debt.

 
This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

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Just imagine. If you could wave a magic wand and turn that $25,000 of credit card debt into $12,500 or even as little as $9,000, wouldn’t that make a HUGE difference to your financial future? You bet it would! Most people are skeptical that this approach is possible. But if you have a professional debt negotiator on your team, the odds are very good that he or she can cut your debt in HALF or less.

How is this possible? It’s very simple, actually. Put yourself in the shoes of a manager of a collection department for a major credit card bank. You know that bankruptcies are at an all-time high, that consumers file bankruptcy at the drop of a hat these days, and that the chances of collecting any money gets worse as the debt ages. You have the opportunity to close your books on a delinquent account by collecting 50 pennies for every dollar owed by the debtor, or take a chance on never collecting a single penny by trying to hold out for the full account value. You also realize that once the debt leaves your bank (usually after six months or so), it will go to a third-party collection agency. The agency will take at least 15%-20% commission right off the top of whatever they collect, and they are unlikely to collect more than 70% of the debt even with the most aggressive tactics. So you’ll probably never retrieve much more than half the money anyway. When you look at it this way, collecting 50% now doesn’t seem like such a bad prospect.

Now, the way we’ve described it above, it sounds like a piece of cake. You might be thinking, “OK, I’ll get on the phone and do this myself.” What will happen? You’ll reach the “customer assistance team” described above, and the representative will inform you that other banks may settle for 50%, but their bank never settles for less than 85%, under any circumstances. But, of course, they do have that wonderful hardship program for you.

After you’ve called five or six banks and received the same treatment, you’ll probably end up with the idea that debt negotiation doesn’t work. The problem is that the banks will rarely take a debtor seriously. Unfortunately, they simply don’t believe you and they think your hardship story is phony. The banks are quite prepared for the amateur do it yourself negotiator. They have the telephone scripts all set up so that by the time the conversation is over, the caller feels guilty about the money owed, and their lame hardship plan sounds like a great deal after all.

We’re professionals, but if one of us ever got into a financial pickle, we’d never try to negotiate our own debts. Instead, we’d hire one of our colleagues to do the job for us. We can’t emphasize this enough. Just having a third-party professional on your team makes all the difference in the world. There is something almost magical about this simple approach. Once the banks realize that they are talking to a professional, someone who knows the rules and regulations, and then they quickly change their tune. A negotiator will obtain better results than you could ever obtain on your own, simply because all of the bank’s tactics are stymied by the fact that they can’t talk directly to you. They can’t apply psychological pressure to you, since your representative filters this out.

Besides, there’s no shame in seeking help. Look at it this way: the banks pull out all the big guns when you fall behind. They have an army of collectors ready to pressure you with carefully scripted techniques. They have collection agencies and attorneys waiting in the wings to go after you full throttle. Doesn’t it make sense to level the playing field? Doesn’t it make sense to concentrate on improving your finances and let someone else deal with the aggravation of the incessant phone calls that start flooding in once you get behind?

Let’s go over the negotiation process in a little more detail. When you become a client of a professional debt negotiator, he or she will impose two simple rules for you to follow:

Rule No. 1: Don’t talk to your creditors.

Rule No. 2: Save as much money as possible.

Do you think you can handle those rules? They’re tough, aren’t they? Let us explain exactly why these rules are so important.

Rule No. 1 is important because only one person can negotiate your debts for you. If you only allow the negotiator to handle some of the phone calls while you make other calls yourself, the odds are high that you will say something that is not in your best interests, thereby undermining your negotiator.

You’ve seen the cop shows on TV, where they always read a suspect his or her rights while they’re being arrested. “You have the right to remain silent,” and so forth. Well, in debt collection, there is a similar rule. A debt collector is supposed to tell you the following: “This is an attempt to collect a debt. Any information you give us will be used for that purpose.”

Your debt negotiator knows exactly what information to disclose, when to disclose it, and when to withhold information. The average person, on the other hand, has no idea what to say in that particular situation. We tend to respect authority. Collectors have a lot of nerve and present themselves authoritatively. They ask you where you work, how much you make, how much you pay in rent every month, and so on. The answers, quite frankly, are none of their business. But most people feel compelled to answer, in a misguided attempt to establish rapport with the collector.

So, the first rule is KEEP QUIET, and let your negotiator do the talking.

Rule No. 2 is even more basic. Successful negotiation of your debts will require a reasonable compromise with your creditors. It’s important that you save as much money as possible each month for your negotiator to work with.

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Many home improvement projects require very little prior knowledge or skill to accomplish. Eliminating the need to pay costly carpenters or installers offers you the chance to save sizeable amounts of money, or complete multiple projects for the same amount you would pay a specialist to do a single job.

The majority of homeowners today find themselves within easy driving distance to home improvement centers such as Home Depot and Lowes. These retailers offer not only all the tools and equipment needed to complete most projects, but also provide many types of free weekend workshops designed to help the first time renovator add a little more sparkle to their home. Similar workshops are also available at most local and neighborhood hardware stores.

See below for a sampling of Do-It-Yourself home improvement projects to work on this summer:

•  Freshen Up The Walls: A new coat of paint can be a cheap and easy way to brighten up your home’s interior. Requiring little skill and only a few simple tools, such as brushes, buckets, painter’s tape, and drop cloths, fresh paint (particularly a neutral color) is also a great way to position a home for the real estate market. Also check for free workshops in your area to learn more advanced painting techniques for a truly unique look.
• Replace Fixtures: Switch plates, outlet covers, curtain rods, light fixtures and doorknobs are often overlooked when it comes to home improvement. But with little more than a screwdriver and a few hours of your time, replacing fixtures can completely change the look of your home’s interior; from modern, to country or antique, and anything in between.
• Reveal and Restore Hardwood Floors: In many older homes, beautiful hardwood floors are hidden beneath layers of old carpet or linoleum. If you suspect your home has hidden hardwood flooring, peel up an inconspicuous corner of the carpet or floor covering to check. Although many of these older hardwood floors require refinishing, the job is not as daunting as you would think. Most home improvement centers and local hardware stores offer tool rentals on large industrial floor sanders which speed up the process considerably. They can also offer professional pointers and advice for a high-quality finish.
• Fix Up The Bathroom: Installing tile floors, shower surrounds, updated vanities, light fixtures, and toilets is a surprisingly painless task. Although proper tiling requires some degree of skill and a few specialized tools, just about anyone can learn to do it quickly. Use the money you save by doing it yourself to purchase higher end products and give your new bathroom that true “spa” feel.
• Reface Your Kitchen Cabinets: At a fraction of the cost of new cabinets, cabinet refacing involves using pre-cut vinyl or wood veneers in conjunction with new doors and hardware to alter the look of your existing cabinets. This quick and easy process can drastically change the look of any kitchen in as little as two hours.

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It is important to get in the habit of using credit responsibly. The first step in establishing this habit is to understand the cost of credit. Did you know that if you had a balance of $500.00 on your credit card and only paid the minimum balance every month it would take you almost seven years to pay it off?* The total interest would end up costing you $404.64. That means your $500.00 purchase on your credit card actually cost you $904.64! When you make a purchase on your credit card, an Annual Percentage Rate (APR) is charged. An APR is the percentage rate calculated on a yearly basis. Some banks have higher APRs than other banks. Before you apply for a credit card, find out what APR the bank is charging.

Being responsible with your credit means not spending beyond what you can afford. When you use your credit card, keep an index card in your wallet and write down the purchases you make. That way there will be no surprises when your credit card statement arrives in the mail. You will also be able to keep a handle on what you are spending. Make sure you are charging only what you can afford to pay.

Be cautious of the discounts that many stores offer if you sign up for their credit cards. Have you ever been to a clothing store and the clerk asked if you would like to open up an account and save ten percent on your purchase? Those cards usually carry high interest rates and, in the long run, will cost you more than the ten percent you saved on your initial purchase. If you choose to apply for one of these cards, be sure to inquire about the interest rate and grace period.

Always pay off your credit card balance in full every month. Since you will already know the balance due before you get your statement (because you wrote down your purchases on the index card), put money aside to pay the bill. When you get the credit card statement, pay it on time. By paying off your credit card balance in full and on time, you should be able to avoid some interest charges, late fees, and potential debt.

If you are having trouble disciplining yourself to pay off your balance every month, consider getting a card that requires you to pay the full balance every month.

Get in the habit of using credit responsibly while you are young and it will help you in your future. Be proud on graduation day, not only because you made it through college, but also because you made it through college debt free!

*Figure is based on minimum payment of 3% of balance and 1.75% interest per month; may vary by bank.

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3. Good Credit vs. Bad Credit

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