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Controlling Finances Part 2
Having too many credit cards. Two to four cards (including any from department stores, oil companies and other retailers) is the right number for most adults while controlling finances. Why not more cards?
The more credit cards you carry, the more inclined you may be to use them for costly impulse buying. In addition, each card you own — even the ones you don't use — represents money that you could borrow up to the card's spending limit. If you apply for new credit you will be seen as someone who, in theory, could get much deeper in debt and you may only qualify for a smaller or costlier loan.
Want some specific ideas for ways to cut back on spending? A good place to start is the Web site for the "66 Ways to Save" campaign (www.66ways.org).
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 non-customers. 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. For more about how to save on ATM fees, see the tips from FDIC Consumer News online at www.fdic.gov/consumers/consumer/news/cnspr04/simple.html.
 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 (see High-Tech Banking, 24/7). 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.
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 For More Information, that can help with your questions or problems.
CONTROLLING FINANCES
Part 1 - Part 2
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