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Money Matters

No Same Day Tax Returns

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Every tax season I see the same ads about getting your tax return as quickly as possible. There are ads on television. There are ads on every light post in town. Why are companies so helpful all of a sudden? Do people really understand the scam they are signing up for?

Refund anticipation loans
Each year customers flood the offices of tax preparers to file 1040s and 1040EZs. Many of these customers will have a refund coming to them and will be offered a “same day tax return” known as a Refund Anticipation Loan (RAL).

For years the government has been cracking down on companies that offer these services charging that they are predatory and falsely advertised. The argument is that companies offering RALs often target low-income families that may feel like they need the money as soon as possible and that companies are not making it clear that RALs are loans that have hefty fees. Customers are led to believe that the check they receive is the refund they are due from the IRS. Many times they don’t realize that what’s actually happening is the tax preparer is providing a loan to the customer, for a large fee, and when the money comes from the IRS it will go to the tax preparer.

Electronic deposits are fast
Customers don’t seem to be aware that the IRS will electronically deposit your refund into your credit union or bank account within two weeks of getting your return for free. Many customers say that they get the money in about eight business days.

Let’s say that you have a $1,500 refund coming. Your tax preparer tells you that you can leave with a check for $1,140 right now. It sounds great until you realize that you’re giving up $360. With a little bit of patience you could have the whole $1,500 in a little more than one week.

Always remember the PIL
Remember, this is a loan we are talking about. They are not helping you out, they are providing a service, for a fee. Every time you consider taking out a loan you need to know the Principle, Interest rate, and Length of the loan (PIL). In our example, the principle is $1,140, the interest rate is 24%, and the length of the loan is eight days. Does that sound like a good opportunity?

As you can tell, I’m not a big fan of same-day tax refunds. Regardless of if you choose to use them or not, it’s important to understand what same-day tax refunds are (refund anticipation loans) and what they are not (a nice service to make your life easier). Go into every decision with your eyes wide open.

Shay Olivarria is the most dynamic financial education speaker working today. She speaks at high schools, colleges, and companies across the country. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. Shay has been quoted on Bankrate.com, FoxBusiness.com, and The Credit Union Times, among others. To schedule Shay to speak at your event or to download her new eBook, visit www.BiggerThanYourBlock.com.

Three Reasons We Must Teach Financial Education

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As Financial Education Month (April) draws near, I am reminded of why it’s important that the community of students, parents, financial educators, and financial institutions work together to promote basic personal finance.

Expectations Are Changed
Students today are constantly marketed to. I work with students and get to hear what they think their lives will be like in five years, in ten years, etc. They have expectations that are, many times, out of line with reality. Students want to live in beautiful homes that they own, drive fast, shiny cars, and wear fashionable clothes. They also expect to make top dollar right out of college. Part of our job as community members is to help students understand how much things cost and what it will take to purchase these things smartly.

The Middle Class?
Most parents strive to have the next generation be more financially stable than the last generation. To make that happen we have to make sure that students are confident that they can navigate personal finance. It’s very common to hear students say that they are concerned about taking out a car loan, mortgage, etc. because they don’t want to be “scammed”. Students have to understand the concepts of principle, interest rates, and length of time of the loan so they can make good choices.

Retirement Soon Cometh
Young people are concerned about social security, the job market and the lack of pensions. Students are generally interested in investing for retirement, but they aren’t sure how to begin. It’s common knowledge that investing early and often is they key to being stable during retirement, but students won’t invest if they are nervous. Our job is to help students understand how investing works, so they can make their own decisions about how to invest.

How we do help educate students about personal finance? We steer them towards programs, books, and workshops that are easy to understand and provide the knowledge they need. We use teachable moments to have discussions with them about personal finance. We encourage them to ask questions and use their critical thinking skills to make decisions. If we all work together, we’ll all reap the benefits.

Shay Olivarria is the most dynamic financial education speaker working today. She speaks at high schools, colleges, and companies across the country. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. Shay has been quoted on Bankrate.com, FoxBusiness.com, and The Credit Union Times, among others. To schedule Shay to speak at your event or to download her new eBook, visit www.BiggerThanYourBlock.com.

I Agree With Newt Gingrich

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There are a lot of things that can be said about Newt Gingrich, many of them cannot be printed in this newspaper. So, imagine my surprise to find out that I agree with Newt Gingrich on one very important topic.

The House Ethics Committee investigated eighty-four charges against Newt for almost two years ending in 1997. During the investigation, 1,000 pages of his personal pages were scrutinized. In those pages, he wrote, “For poor minorities, entrepreneurship in small business is the key to future wealth”. I hoped that the words would say something that could make me despise him, but he continued, "This is understood thoroughly by most of the Asians, partially by Latinos, and to a tragically small degree by much of the American black community." I wanted to be outraged. I wanted to disagree with every thought he ever had, but I couldn’t refute the bald-faced truth: I agreed with him.

African-Americans have not fared well during the Great Recession. The unemployment rate for African-Americans stayed at about 15.8% during 2011 while the unemployment rate for all other cultural groups in America fell. Could it be that other groups are not waiting to be given a job, but are instead making their own jobs?

All of us have skills that others would pay to have access to. Instead of waiting and hoping that those skills are recognized and appreciated, we should be setting up businesses. Owning a business is hard, it’s stressful, and sometimes is a downright pain in the you-know-what, but guess what else it is? It’s confidence-building to be able to charge what you are worth. It’s liberating to be able to manage your own time. You know what? It might be just the thing we need to lower that unemployment rate.

Shay Olivarria is the most dynamic financial education speaker working today. She speaks at high schools, colleges, and companies across the country. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. Shay has been quoted on Bankrate.com, FoxBusiness.com, and The Credit Union Times, among others. To schedule Shay to speak at your event or to download her new eBook, visit www.BiggerThanYourBlock.com.

Three Common Myths About Using Prepaid Debit Cards

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There are a slew of new prepaid debit cards promising everything from raising your credit score to roadside assistance, but are these cards really better than an account at a financial institution? Let’s take a look at the three most common myths about using prepaid debit cards.

#1 I can’t open an account at a financial institution.
The FDIC sponsored a supplemental piece to the U.S. Census in 2009. That survey found that 9 million people, or7.7 percent of American households, do not have accounts at a credit union or bank. In the Black community that number rises to 21.7 percent.

Many people that choose to use prepaid debit cards do so because they have an account on ChexSystems and think that they are unable to open an account at a credit union or bank. There are many financial institutions that will work with you to get you back on track. These accounts are sometimes called “second chance accounts”. Of course, you could always pay the financial institution the money you owe, and have your file cleared at ChexSystems. That way you’d be able to open an account at any financial institution you like.

#2 I can avoid fees by using a prepaid debit card.
This is one of the main reasons why people are turning to prepaid debit cards. Stories in the media about banks raising fees, and in some cases creating new fees, are causing some customers to leave traditional financial institutions in search of greener pastures. More and more companies are rushing to meet this need.

Prepaid cards from Russell Simmons, Suze Orman, and American Express are available, along with scores of others, at many retail locations. Most of these cards have fees to buy the card, fees to put money on the card, fees to use ATMs, fees to make point-of-sale purchases, and sometimes there are monthly fees to keep the card open. Doesn’t sound like you’re avoiding too many fees, does it?

#3 I’m rebuilding my credit scores by using a prepaid debit card.
This is a common misconception. Prepaid debit cards act like any other debit card from a credit union or bank. It uses the money in your account to buy things that you want when you use the card. There is no way it could improve your credit scores because it’s not using any type of credit.

There are secured credit cards that can improve your credit scores, depending on which financial institution you’re working with, but secured credit cards are not prepaid debit cards. Look closely at the fine print. Just because you’re usage is being reported to a credit bureau does not mean that those reports will effect your scores.

If you choose to use a prepaid card, make sure that you understand exactly what fees will be assessed and how much those fees will be. There is a lot of misinformation floating around about prepaid debit cards.

What things, good or bad, have you heard about them?

Shay Olivarria is the most dynamic financial education speaker working today. She speaks at high schools, colleges, and companies across the country. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. Shay has been quoted on Bankrate.com, FoxBusiness.com, and The Credit Union Times, among others. To schedule Shay to speak at your event or to download her new eBook, visit www.BiggerThanYourBlock.com.

Passive Income is Beautiful

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Each of us should be striving to have money working for us instead of the other way around. Most of us know about getting a job and then getting up and working at that job Monday through Friday for as long as they let us work there. That is not the only way to provide for our families.

What is passive income?
Passive income is money that is earned from doing nothing, or almost nothing. Getting up and going to work is active income. You have to do something to get it. If you don’t do something then you don’t get the money. Passive income is the opposite. Investments are passive income. Books, songs, and films are passive income. Once you’ve created the thing, it can be sold in perpetuity with little to no more work from you. It’s a truly beautiful thing.

Why do we want it?
There is no greater satisfaction than knowing that you are earning money while you sleep. A key axiom of life is that we should work smarter, not harder. You may be thinking that you enjoy your job. You don’t have a problem with your income and you don’t have the will to create a passive stream of income for yourself, and all of that may be true, but if you could earn income from doing little more than you’re doing right this second and get more income, wouldn’t you do it?

How do we get it?
There are several ways to set up streams of passive income, but one of the most direct way is to create something from nothing and sell it. That could be recording a CD that can be sold on CDBaby.com or publishing a book at CreateSpace.com. The key is to create something that can be easily replicated and sold online. Another great option is to own multi-family dwelling units. You let other people pay your mortgage off while a property management company handles the day-to-day problems.

Regardless what form of passive income you choose to pursue, the point is that you must incorporate passive streams of income into your wealth building goals.

What streams of passive income are you considering?

Shay Olivarria is the most dynamic financial education speaker working today. She speaks at high schools, colleges, and companies across the country. She has written three books on personal finance, including Amazon Best Seller “Money Matters: The Get It Done in 1 Minute Workbook”. Shay has been quoted on Bankrate.com, FoxBusiness.com, and The Credit Union Times, among others. To schedule Shay to speak at your event or to download her new eBook, visit www.BiggerThanYourBlock.com.

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