That is an excellent question. In fact, there are several good reasons to establish a checking account. Once your funds are deposited in your bank account they are insured by the FDIC up to $250,000. A checking account is safer than carrying cash and they provide a convenient means of paying your bills (either by check, debit card, or online). Checking accounts give you the ability to track your income and expenses, make it possible to receive your paycheck electronically (you get your money faster and don’t have to go to the bank on payday), and you can easily get cash by going to the bank or an ATM. A checking account also gives you free access to online banking, making banking easier and more convenient than ever.

In the past couple of years banks have been offering more options with your checking account – from making person to person payments electronically (like Biddeford Savings’ Popmoney feature) to depositing checks from your smartphone (coming soon!). Most banks offer mobile apps in addition to online banking that allow you to do your banking anywhere, anytime. While a savings account offers many of these features, only a checking account offers them all.

But remember with a checking account you do have additional responsibilities – it is important to record all transactions in your register (whether paper or online) and you need to be sure you have adequate funds before writing a check, using your debit card, or paying bills online. Each month when your statement arrives it is best to balance your account – by doing so you make sure only transactions you initiated are being posted to your account. Your monthly statement will also provide you with the information you need to track your income and expenses (maintain a budget, in other words) and most banks even offer software or apps to help you do this – Biddeford Savings offers FinanceWorks to help our customers.

To summarize, checking accounts are useful in many ways and in the coming posts I will talk about the different types of checking accounts, offer some tips on using them most effectively, and then a little bit about business checking accounts. Stay tuned.

If you have a child you’re probably wondering where the money for college will come from. The most important step is to begin saving money for your child’s education when they are born. In Maine, the Alfond Foundation will start you off with $500 if you take the time to apply. Add this to a regular savings plan and you’re well on you way!

But, what if you didn’t start when they were born? Your child is now in middle school, what do you do? Start saving today, it’s better late than never! Figure out what you can afford to set aside from each paycheck and stick with it. This will allow you to build up some funds by the time your child finishes high school. There are also 529 Plans which can be an attractive option. 529 Plans are education savings plans operated by a state or educational institution.

“I can’t afford to save money” is a common reply heard from many parents. Have you looked carefully at where your paycheck goes? Maybe you swing through Dunkin Donuts or Starbucks regularly – how much can you save there? Try to cut back on dinners out and other entertainment expenses. I know, it’s hard but sometimes it’s hard to do the right thing. Getting in the saving habit early and staying with it are the keys.

As high school graduation approaches, your child will have the opportunity to find money in a number of additional places. Have them check with the High School Guidance Office to find out about scholarships at their school. Check online too, there are some really obscure scholarships out there, but you have to go find them. A couple of good websites to look at are www.studentaid.ed.gov and www.bigfuture.college.org/pay-for-college. Of course, most schools offer grants and work study to a great number of their students. As they begin to move through the college application process they can also find out what aid is available from the schools under their consideration. An important thing to keep in mind is that in some cases a more expensive school may offer more aid, meaning the net cost to the family could be lower than that of a public or state school. So, again, keep an open mind and start saving today!

We have probably all seen the figures. Private colleges can cost over $60,000 a year while state universities can cost well over $20,000. Add in the cost of living, transportation, and incidental expenses and it can amount to an awful lot of money. Savings of $250,000 per child is simply not feasible for most people. However, there are many options to lower the cost of post-secondary education.

Some state supported schools are significantly less costly, as well as community colleges, which tend to offer even lower costs. Increasingly, students are spending two years at a community college close to home before attending a college or university for their final two years of school. This approach saves money in two ways, lower tuition and a lower cost of living. Certificate programs are another low cost option. Some areas may also have an apprenticeship program which allows you to learn a trade while you are on the job. This could be the most affordable option of all and still leads to a good career for the right person.

As in so many things, information is your friend. Get educated about the different educational and financial options that are available, so that you can pick what is best for you or your child.

 

 

Is post-secondary education a good investment? There is significant research on this matter and the answer that consistently comes back is, yes.  Research has shown that an adult’s lifetime earnings with a bachelor’s degree are over $1 million higher than those with only a high school diploma, while associates degrees yield lifetime earnings somewhere between the two.  There are also programs which do not offer a degree, such as trade schools, which still allow people to move in to challenging, rewarding, and good paying careers.

I think the most important thing is to find a program which matches up well with your or your child’s interests.  Speaking from my own experience, I was set on attending a four-year college from a young age.  My parents were both college graduates and that was always my pathway.  After college I worked for 2 years and then returned to school, earning a Masters in Business Administration.  What I learned in college and graduate school has helped greatly in my banking career.  In contrast, my younger brother was mechanically inclined from a young age and attended an 18-month certificate program to become a diesel mechanic.  He has built a fine career working on heavy equipment which has enabled him to raise his family and educate his children.  Although we chose different paths that best suited our interests, we each chose the right path for ourselves.

The take away for me is that education does not end with a high school diploma, but a four year degree may not be the answer for you or your child, either.  I encourage you to work with school counselors to determine what path is best for you or your child, and keep an open mind as to what that best path is.  Earning that certificate or diploma will not be the end of your educational process.  I spend a great deal of time reading and learning, and I know my brother does the same.

You are almost home!  A lot of time and effort by many players has resulted in a final agreement on price, mortgage terms, and a closing date.  At this point the Bank hires a Lawyer to research the legal title to the property so that you can close on the purchase.  Having a Lawyer reviewing the documents on your behalf is a good idea – just to be sure everything is done correctly.  The closing itself is fun, you do have to sign a lot of documents and present a check for the rest of the down payment and closing costs but you leave with the keys to your new home.  Congratulations!

Buying a home, especially your first home, is one of the biggest financial decisions you will ever make.  It is also very complex.  If you take it slow, do your homework, and get help from competent professionals – Realtor, Banker, Inspector, Lawyer – you are likely to have a great experience.

It is worth remembering that some costs come after the closing.  Things like lawnmowers, garden tools, snow blowers, property taxes, insurance costs, and homeowner association dues in the event you buy a condominium.  Make sure you have taken those items in to account when you build your budget and decide how much you can afford to spend.

As I noted in the 2^nd post this month, at Biddeford Savings we have trained staff in each branch to assist you along the path to your first home.  Please give us a call, drop by, or send an email.

Okay, you have a good idea of your price range and what type of property and what town you wish to look at.  Now it is time to find a realtor in the town you have chosen – recommendations from friends or family can help find a good Realtor – and meet with them.  One thing to keep in mind, the Realtor works for the seller unless you sign an agreement with them so that they work for you, which is highly advisable.  Know who your Realtor is working for and keep that in mind.  For example, if they are working for the seller you may not wish to disclose your maximum price on a property as that could hurt you in the negotiation process.  The Realtor will want to be sure you are capable of getting a mortgage so have your prequalification letter with you.  If you have specific homes you want to see, let the realtor know.  They will likely come up with some others they think you should consider based upon your preferences and their knowledge of the market.

As you visit homes for sale take good notes about layout, condition, location, pluses and minuses.  Believe me, once you have seen a dozen homes you will need good notes to keep them straight.  Again, the web is a big help as a wealth of information is available on the realtor’s web site.  Don’t be overly concerned about any mechanical issues at this point, the home inspection will address all that.

Once you have settled on a home the Realtor will help you draw up a Purchase and Sale Agreement (P&S).  In many cases there will be a couple of rounds of negotiation as you and the seller reach agreement on price, closing date (typically 45 – 60 days after the P&S is signed), and any sharing of closing costs.  Once the P&S is signed you will want to schedule a home inspection and speak with your bank to move the mortgage application process forward.  Your Realtor should be able to provide you with the names of a couple of Home Inspectors.  They are licensed and you can typically check them out online to find one that suits you.

If the Home Inspection finds defects with the house you may either walk away from the P&S or negotiate with the seller to determine if they will either pay for the repairs or reduce the sale price and sell the house as is.  Just keep in mind that if the price is reduced but repairs are needed you will have to fund those out of pocket.

Once you have successfully moved past the Home Inspection the bank will order an appraisal of the property.  The Appraiser will be looking at the condition and location of the home and comparing it to similar properties recently sold in the immediate area.  As long as the Appraiser values the home at or above the contract price you will now be ready to close.  In the event the appraised value comes in below the contract price you will again be faced with a choice – either come up with a larger down-payment or negotiate with the seller to reduce the price to the amount of the appraisal.

Once you have established a price range to look in you will need to figure out whether you want a single-family house, a multi-family house, or a condo.  That is up to you but a couple of considerations are any future plans for children, desire and ability to maintain a property.

Next up, deciding which community you want to live in.  Think about things like commuting to work, property taxes, access to shopping, proximity to family and friends, the school system.  That will likely narrow the field to a couple of communities.  Once you have narrowed the list of possible communities, go online and search to see what is available in your price range.  You likely will be able to negotiate a final price a bit below the listing price, so anything within 10 -15% of your maximum price is worth considering.  It is good to look at the online pictures to see if the house is empty (the seller is more likely to be negotiable in that case) and the listing usually indicates how long the house has been on the market (the longer the listing has been open the more flexible the seller is likely to be).

At this point it is worth meeting with someone at your bank.  While you could apply online, the first time through the process it makes sense to talk with a Mortgage Officer or Branch Manager so they can pre-qualify you for a mortgage.  Biddeford Savings has staff in every branch that can help – and they have the knowledge and time necessary to assist you.  That pre-qualification will be handy in the next phase of your search.  You can do a lot of research about banks online but be sure to compare loan terms carefully.  A slightly lower loan rate that is accompanied by a requirement for costly Private Mortgage Insurance may not really be a better deal.  At Biddeford Savings we service our mortgages, which means any time you have questions our staff here work with you.  At many lenders your mortgage is serviced out of state, which can be challenging to deal with in some cases.  Do your homework and ask your Banker lots of questions to be sure you understand your options and get the best mortgage for you.

Within a couple of weeks of the P&S getting signed you will get your mortgage approval, unless there was a problem.  If you application is declined be sure you get a full explanation of why and some guidance about what you need to do so that you can get a mortgage approved in the future.  Assuming you are approved, the approval will come with some conditions – satisfactory inspection and appraisal are quite common but there may be others.  Pay attention to those conditions and work with your bank to get these open issues resolved in a timely manner.

So, you are thinking of buying your first home.  Well, you are in luck because this month I will have 4 posts which will help you to understand and survive the process of buying your first home.  The process is complicated and you will be well served to find competent professionals (Realtor, Banker, Home Inspector, Lawyer) to assist you as you go.

The first step is to determine how much you can afford to spend on your new home.  The answer to this question depends upon:

1. how much money you have saved for the down payment,
2. your income,
3. your credit score,
4. and mortgage interest rates.

Most bank websites include tools (calculators they are called) to help you figure out how much house you can afford.  If you have questions or need assistance, call your local bank and a Mortgage Officer (often the Branch Manager) will be glad to assist you in determining how large a mortgage you would likely be able to afford.

Of course, you must have a good credit history to be approved for a mortgage.  You can typically get your credit score for free online.  If you are ready to start the home buying process I suggest you do your best to pay off credit card balances and delay any large credit purchases (such as a car) until after you have bought your home and are sure you can afford the added payment.  Once you have a ballpark figure you can target your home search much more effectively.

A recent story run on NPR included the interesting fact that only 18% of Americans say they are “very confident” they will have enough money to retire comfortably.  Are you in that desirable minority?  If not, there are a couple of simple steps to take now to improve your odds of being happy then.

First of all, begin to set money aside from each paycheck for retirement.  Whether the money goes in to an IRA or an employer’s plan (for example a 401K) doesn’t matter.  What matters is getting in the habit of setting money aside every paycheck.  I can still remember the advice of a co-worker from over 30 years ago, she would always put a portion of her pay aside for retirement.  As she said, I pay myself first and then my creditors.

If you are fortunate enough to work for an employer who will contribute to your retirement, take full advantage of it.  My employer will contribute $.50 for each $1 I put in to our 401K, up to 6% of my salary.  That means even if I leave the money in a savings account I get an immediate 50% return on my investment.  It would be a shame to miss out on that benefit!  And as we know, the wonder of compound interest means a dollar saved today will be worth a lot more than a dollar saved 20 years from now.  That means the benefit of starting as soon as possible, even if the regular contribution to your savings account is small, is immense.

I know, it is tough to set money aside.  We all have to pay for – fill in the blank – student loans, car payments, and rent.  The trick is to find a way to start small and build good habits.  For instance, skip a meal out each week and set the money aside in your retirement account.  The younger you are the greater the impact of compound interest on your savings.  Go ahead, get started with your next paycheck.

I mentioned in an earlier post that last year our staff served over 4,000 volunteer hours in the communities we serve.  Those hours help the United Way, Sweetser Home for Children, Caring Unlimited, Heart of Biddeford, Junior Achievement, Maine Children’s Cancer Fund, and too many other agencies to list.  Our employees help at fundraising events and serve on Boards of Directors.  The Bank also provides over $100,000 a year of donations and sponsorships.  Those of us who serve truly enjoy it.  In addition to serving our communities this work allows us to connect with neighbors, to learn, and to teach.  The connections come from working alongside other volunteers in support of strong communities.  We learn about the needs present in our communities and the great work being done to address those needs.  Finally, we teach about citizenship by example and we frequently go into schools to teach about financial literacy.  All of these activities enrich our lives while strengthening our communities.