Published On: Mon, May 19th, 2008

Ariana Matos: Latinos and Personal Finance

Personal finance is a sticky subject, especially with Latinos. It’s safe to assume that most of us are hardworking people, living paycheck to paycheck, everyday trying to support ourselves and a family while for some, attending classes at night. Saving or investing money is that last thing you want to think about, especially when you have the rent and light bill due, but it should be the first.

Taking care of your finances is extremely important, not only because we are about to under go another recession, but for emergencies, vacations, that house in Puerto Rico you have always dreamed of having, or for your child’s college education. You may think that you don’t have time or money for those little luxuries in your life, but you can make time and money for them to happen.

Saving money does not have to be painful, nor does it have to feel like a sacrifice. Save a little here and a little there and eventually you have will a whole lot of money that you won’t even know what to do with. Jugando la loteria everyday in hopes of hitting that power ball jackpot is not a wise investment, and the probability of you winning the lottery is about a million to 1, depending on the jackpot. You’re lucky if you even win a dollar back from the scratch off. Either way, the lottery is a bad investment. With the lottery lecture out of the way, I want to talk about starting a savings account.

Savings account:

First let me explain to you what a savings account is and what a savings account isn’t:

A savings account is not the can of Café Busetlo or Piloin that sits in your freezer with a wad of cash in it. Not only is that very old school… it’s not safe there and it does not gain interest. So if you stash $500 dollars in the can and freeze it, six months later you will still have $500.00 in a can.

What a savings account is, a an account where you put in a certain amount of money and that collects interest over time and is there for when ever you need it in an emergency or for that vacation you have been planning for so many months. It’s also safe to have the security of a savings account when either your checking account or check card bounces. What some banks do, is that they link your checking and savings together so when you are overdrawn on your checking, they take it out or your savings to cover your overdraft.

A great thing about having a savings account is, if you lose your job, you have a little bit of a cushion to help cover your personal expenses until you can find another job, and that at times could take months. Great so you have a better understanding what a savings account is, now let’s talk about shopping around for one.

Although many banks offer savings and checking accounts, not all of them have the best percentage rates. The percentage rate is basically how much money you will make by keeping your money at that bank. I am not going to go into the absolute detail of the percentage rates, all I can tell you is that you have to shop around and ask questions! It is very important to ask questions, especially when you it’s your money that they will be handling. Just remember that having a savings account will not only give you a cushion to land on when times are tough, but also some money where you can indulge in luxuries that were at one time unattainable.

Checking accounts…

Checking accounts serve a great purpose… to keep track of your day to day cash flow. You can use your checking account to pay all of your bills whether it is by check or check card, or even over the phone via telephone check. Checking accounts are great because you do not have to carry cash around you all the time, and they are also free with most banks. Although of freedom of writing checks is great, there is also a big responsibility that comes with it. Usually when you open a checking account, the bank gives you this nice little thick folder of stuff and a small box of starter checks. Like me and many of you out there, I never bothered to read the find print in the big fat book they sent me. Who does? Well now I do. Reading the fine print when it comes to checking accounts is extremely important. The fine print explains in great details about keeping your check book balance, and the fees that will incur if you have an overdraft. It also tells you how many overdrafts you can have a year before your over draft fee goes up. The fine print also details the Chex system and why are some people are in, check fraud, and various other topics to discuss in this piece. Either way it is important when you get your checking account to read everything in the packet and balance your check book everyday, even if you used a check card.

Balancing your check book:

Balancing your checkbook can be a tedious task, because that means you have to keep track of every single penny you spent. Checking out your spending online is easier, but it does not give you real time information on how much you have left on your bank balance. The only true way to know you what you exactly have is to keep your bank book balanced. According to Suze Orman, Author of Women&Money, “The process of balancing your checkbook forces you to deal with reality.” If you checking account it all over the place with over drafts and fees and whatnot, then take the time to go to your branch or any bank and sit down with a financial representative. They are the best people to help you out and sort out your accounts and give you a perspective of where you are at with your money. They may even suggest a different account for you if you are a student. Usually these accounts have lower overdraft frees and offer over draft protection. In all, the banks are there to help you.

Ariana Matos: Latinos and Personal Finance