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On My Own

For many people being on your own means financial independence and the freedom to make your own choices. With that freedom, comes many financial firsts, like buying a car, purchasing a home, taking out a loan, opening a credit card, setting up a checking account, and so on. At Alabama Telco, we want to let you know as a member you may be on your own, but you’re never alone! Below we’ve provided some useful information to help you through these big financial decisions.

Getting Started
Whether you’re graduating high school, finishing college or finding yourself suddenly single for the first time, there are a few basics everyone should do when embarking on their newfound financial independence. First and foremost is to establish a budget for yourself. It’s important to live within your means. Many of us starting out, get so excited to have a job with “real” money, we quickly find ourselves spending more than we can afford. Avoid that trap by looking at what you’re making each month and what you need to spend to live. Then consider your “wants”. If you’re heading out to school and don’t have a real job yet, you may be using the money given to you from student loans, grants or your parents. Plan within those means and remember to try and set aside a little each month for savings.

Cool Hookup: While the term “budget” scares many people, it’s really not hard to establish one. We are here to help you with our Home Budget Analysis Calculator. Not only does our calculator help you figure out how much you can save each month, but it's a great tool to help identify areas for improvement. Plus, check out our Find Advice section aptly titled, “Planning a Budget” for more helpful tips!

Rethink the Way You Think About Money
Saving should be a key feature of your budget, but in today’s society, it’s easy to think of money as something to spend and not something to save. This way of thinking is especially prevalent in young adults, who are accustomed to spending their parents’ money. In addition, saving in general is probably the hardest thing to do for anyone just starting out. Don’t let that keep you from trying. Even if it’s just a couple of dollars here and there, establishing a savings plan will help develop good spending habits and set you up for future financial success. Some tips to help you save money now include: setting a limit on entertainment, keeping an eye out for discounts and tracking of all your spending.

Great Quote: “I once had a student show up in a new jacket. He said it was a $200 jacket, but he got it on sale and had ‘saved’ $100. I said ‘Show me the $100.’ I explained that he hadn’t saved $100, he’d spent $100. This surprises many students.” Professor Richard Boyum of the University of Wisconsin-Eau Claire (Source: “13 Financial Tips for College Kids”, www.forbes.com)

Fun Tip: If you’re looking to save more or want tips on avoiding debt, pick up Financial Peace by famed financial guru and author, Dave Ramsey.

Building Credit
To be financially successful on your own, you need to build credit, which to just contradict our previous topic, entails spending money. That’s right, to get good credit you need to spend…but you need to do so wisely. The first step to building good credit is getting a credit card. A “first” credit card can be exciting, tempting and intimidating. Credit cards are a great convenience, which can quickly lead to misuse of them. The golden rule when getting a credit card is to remember it’s borrowed money you must repay. Don’t think of your credit limit as money readily available for you to spend. It’s not an open invitation to shop. Instead, use your credit card as a means of paying for an item and then quickly turn around and pay either the minimum or better yet the full balance. This shows loan officers and creditors you know how to borrow money and pay it back responsibly.

Choosing the right credit card is just as important as knowing how to use it. There are so many different types and special offers available, it can be overwhelming. Ideally, the card you choose should have the lowest fees, the lowest interest rate and provide the most benefits to you. Look for a card with no annual fee and rewards that suit your lifestyle. Also, be weary of “teaser” rates or low introductory rate offers. While some introductory offers sound great, you need to read the fine print. Your everyday rate may jump even higher and fees may be applied for any balance transfers you make.

Once you get the perfect credit card for you, be sure to use it responsibly. If you don’t, it can go from being your best friend one day to your worst enemy the next. Some guidelines to follow include: keep the credit limit low, make payments on time, use the card just for emergencies, never let others use your card, keep track of your use of the card, keep the card active, avoid using the credit card for cash advances (interest rate charged for advances is usually high and interest is charged immediately) and do not let your credit card payments exceed 20% of your monthly income.

Shameless Plug: Alabama Telco offers three different types of VISA Platinum credit cards. From enjoying a low rate to earning points with your purchases to receiving an annual cash rebate, we have a card that suits you. Click here to learn more.

Cool Hookup: You typically can’t get credit unless you already have credit. Ironically, it can be tougher for a young adult who’s working to get a credit card than for a student with no income. Read four ways you can get credit and start building your credit history with “How to Get your First Credit Card”.

Check Yourself before You Wreck Yourself 
One easy way to get a credit card is to apply at the financial institution that holds your checking account. A checking account plays a huge role in establishing your financial independence. It’s one of the first tools acquired in learning effective money management. Like credit cards, there are a variety of checking accounts available. The goal should be to get the best deal you can find. Many checking accounts come with special benefits and features you can customize to suit your needs. Some key features you should look for are no ATM fees, free checks and overdraft protection. Most financial institutions also offer online services making it easier for you to balance your checkbook and view transactions daily.

With your checking account, you may be issued a debit card. It links to your checking account and works much like a check. Debit cards are convenient and can also be used at ATMs for cash withdrawals. Use your debit card wisely. Save receipts and record your purchases so you avoid going in the negative. Balancing your checkbook trains you to better manage your spending as well as helps to build your budget. It’s a quick way to do the math on those “small indulgences”.

Fun Tip: If you’re a college student who spends “only” $20 a week on simply “going out”, your total comes to a total of $1,040 a year.

Cover Yourself
Having the proper insurance is another factor to consider when on your own. Whether it’s auto, health, life or disability, you need to make sure you’re covered. As a young adult, your insurance may have been taken care of through your parents’ policies. Now that you’re on your own, you need to establish your own policy. Ask your parents for advice. Find out if there’s a way to transition the coverage you had under them into your own plan. Be sure to compare policy plans and costs. Don’t just go with the first policy you review. Determine what you can afford and what you really need. For example, some young adults (and even some experts) feel life insurance isn’t important or worthy to have until they are married or have children. Figure out what works best for you in your current situation and make a date with yourself to review your plan every year. Things change in your life and your coverage should reflect those changes.

Shameless Plug: Alabama Telco members are eligible to apply for our TruStage™ Program, which offers discounts on auto, home and life insurance. Click here for more details.

Fun Firsts
Once you’ve covered your basics – a budget, a savings plan, a credit card, a checking account and insurance – you’re ready for the fun stuff! One of the big milestones of financial independence is making your first big purchase. For most of us, that usually entails purchasing your first car or your first home. These purchases can be exciting, stressful and expensive all at the same time. They should not be considered impulsive buys. There are several factors to consider with each.

For your first car, the buying process involves choosing the car you want, negotiating the price and paying for it. While the look and style is important, it’s better to go with a sound, safe vehicle. Operating one that is unsafe or requires a great deal of maintenance is not only dangerous to you and those riding with and around you, but it could cost you more in the long run. Check with your insurance company to see what cars are on their “good safety lists”. This will help you save money as well on your car insurance. If you’re debating on a used or new car, write down the pros and cons to each. While new cars always come with a warranty, they are more expensive. Used cars are cheaper but of course may need repairs. Always look at mileage and check the N.A.D.A. and Kelley blue book value to see if it’s priced right.

Shameless Plug: When you’re ready to make your purchase, apply for an Alabama Telco auto loan. We offer pre-approvals, blank checks, low rates, optional loan protection, expert advice and convenient financing at the dealership. Click here to learn more.

Cool Hookup: For a complete guide on everything car-related, check out www.edmunds.com. From reviews to top ten lists to expert advice, you are sure to find the answers you need.

For your first home, what you can afford depends on the size of your mortgage, mortgage rates, costs of home ownership, your other expenses and your income. One rule to remember and live by is that your mortgage payment, along with property taxes and insurance, should be no more than 28% of your household income. You also need to consider your down payment, which ideally should be 20% of the purchase price, closing costs, appraisal fees, utilities and maintenance costs. And if you’re starting from scratch, you will need to be able to furnish your new home, which also adds up quickly.

Shameless Plug: At Alabama Telco, we not only offer mortgages with convenient terms, competitive rates and low fees, we also have a Mortgage Specialist on hand to walk you through the process and assist you in making the best decision. Click here to learn more.

If you can’t afford to purchase a home yet, but are ready to become a first-time renter, there are a few things you should consider as well. You not only need to figure in the cost of rent but the cost of utilities, furniture, cleaning supplies and renter’s insurance. On average, most people spend over 1/3 of their salary on housing. Figure out what 1/3 of your net spendable income (meaning your paycheck after taxes and deductions) is to determine what you can afford. Also read the fine print on your lease to learn what it will take or cost you to get out of it if necessary.

Cool Hookup: To view Money Magazine’s 2009 list of the “Best Places to Live in the U.S.”, click here.

When Debt Comes Knocking
There’s a first for everything…no matter how financially fresh you are when you start out in life, it’s hard to completely avoid debt. In fact, for most of us starting on our own, we already find ourselves in debt thanks in part to student loans, credit card bills and unforeseen expenses. Be smart about your decisions. Look into creative ways to consolidate debt…like a low-interest loan or a home equity line of credit. In addition, find new ways to save money in paying down your debt. Look for discounts, start bringing your lunch, go out less, shop sales or vintage stores and consult with your financial institution for advice. And finally, make sure your debt is legitimate. Verify your credit report every year to insure there is no fraudulent activity on your account. Plus, keep track of your credit score. The more you pay down your debt, the better your score will be.

Cool Hookup: To request a free credit report, visit www.annualcreditreport.com.

Fortune Telling
Now that you’re on your own, you are probably making a great deal of financial decisions, and it can become rather overwhelming. You are learning how the financial system works as well as what works best for you. Thinking about the future may not be high on your priority list, but by getting a head start now, you are setting yourself up for financial success. This is the time to think about your first financial investment. Whether it’s establishing a 401K at your work, setting up an IRA or playing the stock market, the sooner you start in life, the greater your chance of earning more from your current funds. Think of investment as a long-term process. The market fluctuates and so should your investment strategy and goals. As you grow older, you should take less risk and will hopefully have more funds to invest.

Shameless Plug: Our financial experts can assist in creating a personal financial management program you can follow in order for you to achieve your future monetary objectives. For more details, click here.

Fun Tip: Most of us have an image of millionaires as people who inherited their money or got famous. However, most of the people that are actually millionaires got there through strong individual financial planning. They’re frugal people with a head on their shoulders and are often indistinguishable on the street from anyone else. To learn what it takes to become a millionaire, pick up a copy of the book, The Millionaire Next Door.

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