Ask the Experts

Big Buys

Posted on

I’m set to graduate pretty soon, but I don’t feel totally ready for the real world. One thing that I really don’t think I’m ready for is making big purchases, like buying a car or a house. I try hard to save money when I work over the summer, but I don’t think the budgeting lessons I’ve learned while away from campus for a few months at a time have given me anywhere near the level of knowledge I’ll need to buy a $15,000 car or an even more expensive house! So, experts: any tips?

Sure! You no doubt know that buying a car can often involve taking out a loan, and that buying a home nearly always does. Still, to make a big investment like that, you’ll need some money saved up for a downpayment, a steady income to help you make the loan payments, and a solid grasp of budgeting in order to determine just how much car or home you can afford.

It starts, of course, with saving. You can always stand to have a little cash in your checking account, say the financial experts at Watertown, New York’s Carthage Savings and Loan Association, but once you’re comfortable with your ability to write checks and make regular payments, you should start building a nest egg in a savings account. A savings account will offer you a better interest rate than a checking account, making it easier to build wealth. And the money in a savings account will be easy for you to access, making it a smart choice for short-term savings intended to end up as car or house down payments; longer-term savings may be better off in investments or tax-sheltered retirement funds.

Your savings habits will help you determine how much you should spend on a car or a house. There’s no one right answer for either case, but typically consultants like to recommend at least a 20 percent down payment on a car; houses are trickier, but traditionalists favor 20 percent there as well. And don’t forget about the monthly payments–make sure that your income is enough to handle those.

You say that your summer financial lessons won’t be enough to help you, but that’s not necessarily true. Saving really is as simple as spending less than you earn, so if that’s what you mastered during summers on the job, then you’re all set. From there, it’s just about steady execution and a smart evaluation of your means before you take out a loan. Reputable auto dealers will help you find a loan, say the retailers at Alabaster, Alabama’s Ernest McCarty Ford, so steer clear of the shady low-rate dealers and trust your savings habits to help you get financing from a more reputable source. Your good habits will put you on the path to making these sorts of big purchases safely, so don’t worry!

“Economy is idealism in its most practical form.” — Calvin Coolidge

Marcus Williams is a Senior Financial Consultant in Financial Services and Advisory at EY.

Related Articles
Ask the Experts

The Meaning of Materials

Posted on

My dad is a contractor back in our hometown, and he’s been having trouble lately with his expenses. One issue that my dad has is that he keeps using materials that, in my opinion, are just too pricey. The guys using the cheaper materials can undercut his prices, and customers don’t know the difference (until it’s too late). My dad is losing business to cheapskate contractors just because they have lower prices, a few billboards, and pop-up on Google.

Of course, my dad won’t budge on his materials, and he considers this a moral issue. How much difference do materials really make? What can my dad do if he refuses to cut costs?

Do materials really matter? Well, experts say, that depends on the material in question, what it’s being used for, and how well it’s being used.
Ask the Experts

Interfacing With Insurers

Posted on

A storm hit my hometown over the summer and really did a number on my parents’ house (my old childhood home), particularly the roof. My parents, of course, called up their insurance company right away. But the insurance company was just awful, and didn’t really tell them anything, so they got it fixed themselves and then went back to the insurance company to get reimbursed–only to get more arguments and more denials. It’s been terrible for their finances, which are already a little strained with me in school and the holidays coming up. I’m so frustrated for them, and I don’t understand why insurance companies are allowed to deny claims for little nit-picky reasons. Shouldn’t there be laws against this? How can my parents fight back?

Insurance is something that we want to have but hope never to need, and when we do have to make a claim, the process can be frustrating–and sometimes unfair.
Ask the Experts

Foreign Filings

Posted on

Like a lot of college students, I’m going abroad. The difference is, though, that I’m not going during the school year or through a school program. It was important to me to maximize my time on campus, so I worked with my parents to come up with a plan for going abroad on my own. During the summer, I’m going to visit a few countries over the course of a few weeks, visiting historic sites and doing a little bit of an ‘independent study abroad’ program, so to speak.

But one tricky thing about doing this all on my own is that I don’t have the school to guide me about all of the paperwork I need. I’m getting ready to research all the stuff I need to do, but I don’t even really know where to start. For instance, I need a visa, right? How is that different from a passport? Help!

Never fear! It’s important to have your paperwork in order before you head abroad, but the good news is that the information you’ll need for foreign travel is relatively straightforward.