Peer Pressure and MONEY

We have all been put into a situation financially where we did not have the money to spend but spent anyways! Being a college student does not help with this situation either. We live in a world where most feel the need to keep up with their peers and by doing that we sometimes end up spending money that we do not have. Unfortunately, there is not a magic formula to being able to say, “no” when the time comes to financial obligations.

We sometimes go out of our way to avoid tricky situations, especially when it involves money. However, there are some steps that you can take to assist in being able to stick to your budget and not spending money that you do not have. Having honest communication about your finances with your friends and loved ones, budgeting for events, limiting yourself, and not keeping score.

Communicating your goals to your friends and family.

You should be honest with your friends and family when it comes to your goals financially. If they understand what you are trying to accomplish they will have a better understanding of why you turn outings down and why saving or getting out of debt is so important to you.

Budgeting for events.

Almost every goal that you set for yourself in life may have money involved. It is important to set your goals early and decide how you are going to achieve those goals. Budgeting does not have to be only for big lifelong goals, it can be for mini trips or having a fun night out with your friends.

Limit yourself to the amount of activities you do.

In today’s society we often feel pressured to be involved and to not say, “no.” Saying no to going out to dinner, drinks or buying new items all the time can be difficult but it is important to learn how to limit yourself.

Keeping score.

Keeping score with your loved ones, friends and family can be dangerous. When it comes to money you should never compare yourself to what others have or make. Each individual is going to be in a different place at a different time. It is important to not try to keep up with the Joneses.

I leave you with this remember that peer pressure can be difficult but if you make your goals and priorities your number one focus it will affect you less. Last but not least if you ask to not be peer pressured financially or you ask for their help with sticking to your budget from your friends remember, to do the same for them.

By: Camila Haselwood

References:

Friends with Money: How to Handle Peer Pressure

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Retirement Plans

The end of the school year is only weeks away. Many students are getting ready to graduate and jump into a career.  Upon starting a career there is a lot of information you need to be knowledgeable on such as work culture, vacation policies, and salary! Another important aspect of your future career that may get overlooked your company’s employer sponsored retirement plans.  An employer sponsored retirement plan is when both an employer and an employee make contributions into a retirement specific account each month. The contributions are invested on behalf of an employee, who may begin to make withdrawals after retirement. Traditional employer sponsored retirement plans fall into two categories, defined benefit plans and defined contribution plans.

Now that we’ve defined what an employer sponsored retirement plan is and the categories they fall into, let’s jump into the most commonly seen plans.

401(k) Plan

The traditional 401(k) Plan is the most common employee sponsored retirement plan today.  It is a defined contribution plan that is mostly funded by the employee, but often times offers at least a partial employer match.  Features of the 401(k) plan include total control of funds for the employee to invest in until retirement and tax deductible contributions the year they were contributed. This means the all earnings in the 401(k) plan will accumulate on a tax deferred basis until distributions are taken out at retirement. At this point distributions will be taxed as ordinary income.   Annual contributions for 2016 are limited to $18,000, with a catch-up provision of an additional $6,000 for those who are at 50 and above. Early withdrawals (before age 59 ½ ) will face a 10% penalty, and will be taxed as ordinary income.

Defined Benefit Pension Plans

A defined benefit pension, also called a traditional retirement plan provide a fixed monthly payment at retirement for an employee.  In a defined benefit pension plan employees are not responsible for making any contributions because the employer will supply all funds.  Because of this, employers will make all investment decisions and have complete control over the funds contributed until the employee reaches the plans retirement age.

403(b) Plan

The 403(b) works almost identically to the 401(k) Plan but it is specifically intended for non-profit organizations.  So teachers and health care professionals listen up!  The plans are funded mostly by employees, and those contributions are tax deductible when made. Employers usually match these contributions up to a certain percentage.  Contributions percentages are very similar to a 401(k) plan and investment earnings accumulate on a tax deferred basis.

The retirement plans we highlighted are just a few of the most commonly seen plans offered.  Other plans include the Savings Incentive Match Plan for Employees Plan, Simplified Employee Pension Plan and the 457 Plan.

If you would like more information on the plans we discussed or have any other questions regarding retirement plans and contract negation, Powercat Financial Counseling is here to help! Schedule an appointment at http://www.k-state.edu/pfc/ to see one of our knowledgeable Peer Financial Counselors.

Brett Zapletal

Peer Counselor I

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Know What Goes Into Your Credit Score

If you are one that pays your bills on time, you deserve some sort of reward. That is exactly what your credit score is for. Basically, your score can tell lenders, credit card companies, landlords, and even employers how much of a credit risk you are to them.

So check out what your score means, what goes into making your score, and some tips on how to improve it!

What does my number mean?

The most used credit score is called your FICO score, which will normally range from 300-850.

750 or Higher: Having a score higher than 750 will put you in the top 20% of all U.S. consumers. This will lead to the lowest interest rate available when applying for loans.

700-749: If you have a score that falls in this category, you are still sitting at above average. Here, you should feel pretty confident when applying for a loan but should know that your score can still be improved.

640-699: With a score in this category, you will find yourself at the national average. This should tell you that you have plenty of room to grow and that you should look for new ways to establish credit.

580-639: Having a score in this category, you find yourself below the national average. With this score, you may or may not be accepted for loans or new credit, and if you are, the interest rate will be often fairly high.

579 or Lower: This is the lowest category. If your score sits below 579, you should definitely look for new ways to establish credit so that you are able to take out necessary loans when that time comes.

Debt can be scary, but it is extremely difficult to establish a solid credit score without taking on some amount of debt. Do not be credit invisible and begin to establish a credit history.

The five factors that go into making a credit score:

35% – Payment History: Your payment history carries the biggest wait of all five factors. It is vital that you make your monthly payments on time so that your score is positively affected. The way you handled money in the past is often the way you’ll handle it in the future.

30% – Amounts Owed: Lenders want to see that you don’t overuse your credit. Often times, you should want to keep 75% of your credit line available at all times to increase your score.

15% – Length of Credit History: Your credit score will take into account the oldest and newest accounts into consideration. The longer you have an account open, the better. Never cancel old accounts, even if you are no longer using them.

10% – Types of Credit: Your score considers a mix of types of credit. This will include credit cards, student loans, mortgages, etc. Make sure you don’t open too many or too few of one type of account.

10% – New Credit: Don’t open multiple new lines of credit in a small amount of time. This could lead to hard inquires that will negatively affect your credit score. Hard inquires occur when lenders or creditors request your credit report to approve you for a loan or credit card.

Credit cards are not the culprits; abuse of credit cards is!

Tips to help improve your credit score:

  • Check your free credit report quarterly to make sure there are no inaccuracies on your report. You can pull one free report from each of the credit bureaus per year (Equifax, Experian, Transunion)
  • Pay the bills on time to show that you are a responsible consumer
  • Reduce your debt. Each time you make payments on your debt, your credit score will improve
  • Put the shared utility bills in your name and make on time monthly payments
  • Shop for loans quickly. If lenders make multiple hard inquires within a two week period, they will only count as one inquiry.

Nolan Keim
Peer Counselor I
Powercat Financial Counseling
www.k-state.edu/pfc

 

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