Banking & Finance 2021

BANKING & FINANCE

Tips for family budgeting

what to know about student loans Saving for a rainy day

A Special Advertising Section by The Bangor Daily News | October 15, 2021

2 BANKING & FINANCE • Bangor Daily News Special Advertising Section • October 15, 2021

Borrowing for College:

What to Know About Student Loans

BY CRYSTAL SANDS

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For many college students, paying for the costs of college can feel like a daunting endeavor. It was no different for me. I am a first-generation college student who went to graduate school and earned my PhD. Like many first-generation college students, paying for college was a struggle for me. I qualified for some grants, but the grants didn’t cover my tuition and didn’t even touch fees or textbooks. I remember standing at the checkout in the bookstore one semester and watching in terror as the total for my textbooks exceeded $700. How was I going to pay for all of this?

The answer for me was student loans, and this has been the answer for so many other students. Unfortunately, loans can sometimes be difficult to pay off, especially if the income you earn when you graduate doesn’t match what you anticipated. For people like me, student loans mean the difference between going to college and not going to college, but it is important to be aware of what you are getting into when you borrow. The goal should be to borrow as little as possible.

3 Important Things to Know William Norbert, Governmental Affairs and Communications Manager at FAME (Finance Authority of Maine), says that there are three important things to remember when it comes to using student loans to pay for your college. First, Norbert says,

“Loans should be used as a last resort, after you have exhausted all other financing options, such as grants and scholarships.”

As a part of this, students and potential students should complete their FAFSA (Free Application for Federal Student Aid) on time each year. Your FAFSA results will determine your eligibility for other methods of paying for college, like the grants, Norbert mentions.

Norbert says the second thing to consider is your future earnings. “It is important that borrowers consider the return on investment for taking out loans to pay for college,” says Norbert. He says he encourages potential borrowers to explore a website called CareerOneStop to learn more about your future work, especially the median income for your field.

Of course, median income can be tricky. When I was in college, I studied the median income for college professors not fully understanding how widely salaries could vary.

My first full-time professor job paid so little that I was barely able to afford food for my family after paying rent. Paying back my student loans was not possible. It was going to take me some time to get to the median salary in my field, but my student loans were due shortly after I graduated.

Like many former students, I ended up putting my loans into forbearance, which

BANKING & FINANCE • Bangor Daily News Special Advertising Section • October 15, 2021

gave me a grace period where I didn’t have to pay. However, the interest on my loans accrued during the forbearance, so once I was able to start paying my loans, I ended up owing more than I had originally borrowed. And not all loans are eligible for forbearance. It is important to be aware of the kinds of loans you are getting and what your payment or grace-period options are after you graduate.

Norbert says the best approach to pay for college without borrowing too much is the “piecemeal approach,” which is something that is emphasized on FAME’s website.

Norbert says, “The idea behind the piecemeal approach is that the more ‘pieces’ or sources of funding you have, the better. More pieces result in more options and less reliance on any one source, like loans.”

Norbert adds, if you do have to use student loans, his third piece of advice is to ask for help when you need it. There are options if you are struggling to pay for your loans, and while interest may cause your loan balances to grow, getting help is better than letting your student loans go into default, which can result in your transcripts from your degree being frozen. This means you may not be able to get new employment or a better job where your transcripts are required. It is important to always be in good standing with your loan provider.

In my case, student loans were a big part of my options for paying for college, and I am thankful that I was able to attend college and earn my degrees. However, borrowing for college with your eyes open can really make a difference in your quality of life after graduation.

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4 BANKING & FINANCE • Bangor Daily News Special Advertising Section • October 15, 2021

Family Budgeting

Establishing A Budget Helps Families Stay on Track During Economic Uncertainty

BY WANDA CURTIS

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Many people are finding themselves stressed today due to inflation. That’s why it’s the perfect time to establish a budget. A workforce specialist for the statewide training program New Ventures Maine, Kelley Glidden, said creating a budget is a critical step in understanding your financial situation and managing your money. She said it helps families to focus in on exactly how much they need for necessities like rent or mortgage, food and utilities before making other expenditures.

According to Glidden, it’s even more important to establish a budget during times of economic uncertainty. She said when prices are unpredictable or rising, having a clear picture of one’s financial situation can help people make decisions more easily as circumstances change.

“If you know how much money you need to cover the basic necessities each month, you can decide to cut back in certain areas, or focus on putting more into your emergency fund,” said Glidden.

“Having a budget puts you in charge of your finances and takes the guesswork out of money management.”

The first step in establishing a budget, Glidden said, is gathering information about monthly expenses. She said that some expenses, such as rent or mortgage, car loan payments or student loans are the same each month. However, other household expenses, such as groceries and eating out, gas, electricity and credit card payments, may vary.

“Once you have all of your monthly expenses listed out, you’re off to a good start,” said Glidden. “Another helpful step is to track your expenses for a few weeks to get a good sense of your day-to-day spending. It’s often the small things like snacks, a cup of coffee or that impulse purchase at the register that we forget about. Then, compare your monthly expenses to your monthly income. If you have enough to cover all the expenses and have some left over, you’re ready to start setting some savings goals. That’s a good time for a family discussion about priorities and

working together to reach shared goals. If you don’t have enough to cover expenses, you may need to look for areas to cut back, like cancelling streaming services or switching to a less expensive phone plan.”

In addition to setting money aside for regular monthly expenses, Glidden said that it’s important to have an emergency fund, which she described as a “safety net.”

Without an emergency fund, she said that people often rely on credit.

“Using credit means paying interest,” said Glidden. “If you have $500 dollars in your emergency fund, and a $400 car repair comes up, you can pay it outright. If you put the repair on a credit card, depending on how long you take to pay the balance, you may have to pay fees or interest over and above the original $400 repair. The important thing about an emergency fund is to use it only for emergencies and not other unexpected expenses.”

Once money is set aside for everyday necessities and emergency situations, Glidden said that it’s important to include a plan for savings in the budget. She said that allows an individual or family to be proactive about planning ahead for large expenditures in the future.

“A budget can also help keep you on track for your financial goals,” said Glidden.

“Without a budget in place, setting money aside for savings often becomes an afterthought. By building savings into your budget, you can be proactive about planning ahead for a major purchase, a family trip or an unexpected expense.”

New Ventures Maine is a statewide program of the University of Maine at Augusta.

They offer free interactive classes and workshops online to help people understand the steps to take in creating and maintaining a budget. They also work with people one-onone if they need more assistance after completing their classes. Their classes are listed on the website newventuresmaine.org.

“Our goal is to help empower people to take charge of their finances by providing the tools they need to manage their money,” Glidden said.

“Having a budget puts you in charge of your finances and takes the guesswork out of money management.”

BANKING & FINANCE • Bangor Daily News Special Advertising Section • October 15, 2021

Behaviors that can hurt your credit score Credit plays a vital role in helping people realize their personal and financial goals. A good credit score can help people qualify for favorable home loan terms, ultimately paving the way for them to move into their dream homes. Strong credit histories also can help consumers earn perks, and young people who learn to use credit wisely can avoid potentially costly interest charges that tend to hamper many young adults’ financial freedom.

Many consumers struggle with managing credit. According to FICO®, a data analytics company that developed the FICO score that many lenders use to determine consumer credit risk, more than 10 percent of consumers in the United States have credit scores lower than 550. Any score below 550 is considered very poor.

No two consumers are the same, but many struggling to establish good credit histories may engage in certain behaviors that can hurt their credit scores.

· Taking out too many lines of credit: Consumers without much experience managing their finances, such as college students and young adults, often find credit offers hard to resist. Retailers may offer significant discounts at checkout counters to shoppers willing to sign up for store credit cards. Inexperienced consumers may not recognize that such cards often feature inflated interest rates, especially when compared to more consumer-friendly cards. Avoid opening too many credit accounts, as doing so can adversely affect your credit score and make it easy to lose track of spending.

· Letting interest charges pile up: Paying interest on consumer debt like credit cards will not help consumers improve

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COURTESY OF METRO CREATIVE

their credit scores, so pay balances off immediately. That’s easier to do if you only have one or two lines of credit that you monitor regularly.

· Using credit for daily purchases: Credit is not cash in your pocket and it isn’t money withdrawn directly from a checking or savings account, which is the case when using a debit card. So it’s easy for consumers to lose track of their daily spending if they’re doing that spending with a credit card. Balances can quickly pile up and, if they can’t be paid off in full when the bill comes due, interest charges will begin to accumulate. This trap can be avoided if consumers commit to using credit only in emergency situations or when purchasing big-ticket items that they know they can pay off when the credit card bill is due.

· Failing to monitor credit score: It’s now easier than ever for consumers to track their credit scores. In fact, many credit card companies provide free monthly updates to card holders, who won’t have to lift a finger to see if their scores have improved or worsened over the last 30 days.

Consumers should take advantage of this relatively recent perk so they can see just how their use of credit is affecting their overall scores. They can then use that knowledge to improve their scores going forward.

Certain behaviors can negatively affect consumers’ credit scores. By learning about such behaviors and taking steps to avoid them, consumers can take a big step toward realizing their short- and long-term financial goals.

6 BANKING & FINANCE • Bangor Daily News Special Advertising Section • October 15, 2021

Is a Financial Advisor Right for You?

BY JOSH DEAKIN

Managing your finances can be a confusing, frustrating endeavor depending on what you may be trying to do.

Because of these challenges, you may want to hire a financial advisor to assist you. A financial advisor can wear many hats but in short, a financial advisor helps people make the best decisions with their money to reach their goals.

So how are you supposed to know when it’s the right time to hire a financial advisor? According to Investopedia.com, “Financial advisors can be great when you are confused, emotional or simply ignorant of various wealthmanagement topics. Add in the fact that a majority of people can’t see far enough into the future to imagine their retirement, much less plan for it, professional advice can be very handy. A qualified advisor will ask you a lot of questions — some of them uncontrollable — in order to get the full picture of where you want to take your life.”

Depending on what you need help with, it may be beneficial to request ongoing financial advice. This is especially true for those utilizing a financial advisor to make good investments. It’s important to keep an eye on what your advisor suggests and look out for a potential “churning of your investments” where the advisor buys and sells frequently to boost their own commission.

Finding the Right Advisor To find the right financial advisor for your needs, you need to ask yourself a few questions. The first being what you need help with. Do you want to start planning retirement or maybe start a college fund for your children? These are both common situations someone may enlist the help of an advisor to solve.

Depending on what you need help with, you’ll want to ensure the financial advisor you choose offers assistance with that particular problem. For instance,

Making a Plan After you’ve settled on the right advisor, it’s time to get to work. According to Investopedia.com, “The financial advisor synthesizes all of this initial information into a comprehensive financial plan that will serve as a roadmap for your financial future. It begins with a summary of the key findings from your initial questionnaire and summarizes your current financial situation, including net worth, assets, liabilities, and liquid or working capital.

The financial plan also recaps the goals you and the advisor discussed.”

An advisor helps you balance the risk of your financial decisions to help you feel assured that your finances are in the best hands. Financial advisors work diligently to supply you with the most accurate information and advice so you can make informed decisions with your finances. According to Investopedia, “Anyone can work with a financial advisor at any age and any stage of life. You don’t have to have a high net worth; you just have to find an advisor suited to your situation. The decision to enlist professional help with your money is a highly personal one, but any time you’re feeling overwhelmed, confused, stressed out or scared by your financial situation may be a good time to look for a financial advisor.”

If you have questions or problems that you would like assistance with, reach out to a financial advisor for a consultation.

“An advisor helps you balance the risk of your financial decisions to help you feel assured that your finances are in the best hands.”

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one financial advisor may specialize in tax planning while another may focus on estate planning. These are two very different situations that you’ll want specific help with. To prevent a trial-and-error scenario, research ahead of time to be sure the person you are going to see will be able to help you with your specific needs.

You’ll want to establish the relationship from the beginning, setting constant times and frequencies for meetings. Remember a financial advisor is still an expense on your part and you’ll want to get the most out of your time.

BANKING & FINANCE • Bangor Daily News Special Advertising Section • October 15, 2021

Saving for a Rainy Day What is a rainy day fund or emergency fund?

We all experience unexpected financial emergencies—car repairs, unexpected medical bills, broken appliances, loss of income or even damaged cell phones. Setting up an emergency fund is one important way to protect yourself. By putting money aside for these unplanned expenses, you are able to recover quicker and get back on track towards reaching your larger savings goals. Without savings, a financial emergency–even minor–could have a lasting impact on your financial well-being.

How can I prepare for unexpected expenses?

Set your goal for your emergency savings fund by thinking about the most common kind of unexpected expenses you’ve had in the past and how much they cost. Then, estimate their costs and add up the total amount to get your emergency fund goal. Start saving what you can so that you have something set aside when that first emergency happens. Continue to save regularly until you reach your goal. Setting aside some money for savings weekly or monthly works well for most people.

Is it more important to pay off high-interest debt or have an emergency fund?

We recommend doing both at the same time. By

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BY JANET SMITH, WESTERN MAINE REGIONAL MANAGER/STATEWIDE ASSET MANAGER, NEW VENTURES MAINE

saving some money for an emergency fund at the same time you are paying down debt you will have money to cover an unexpected expense and will not have to add to your debt by borrowing to pay the expense.

What is the match savings program at New Ventures Maine?

The Rainy Day Savings Account (RDSA) Program is a matched savings account for income-eligible individuals and families who want to save money to pay for unexpected emergency expenses. This program matches each dollar you deposit in your RDSA, up to $300, with $1. Saving the maximum amount of $300 will give you $600 to use for unexpected expenses. If you have a car repair that costs $200, you would pay for it with $100 from your Rainy Day Savings and $100 would be paid by the match funds. New Ventures Maine will also help you build your savings skills in money management classes and through individual support.

ing. She also completed New Ventures Maine’s My Money Works class to help build her money management and savings skills. “I found this class very beneficial. I Nadia, New Ventures learned how to budget, Maine customer track spending, and save. This class provided me with the resources and tools for how to survive financially,” she says.

After completing the Rainy Day Savings program, Nadia learned very quickly about the importance of having a rainy day fund. When her car broke down, she was able to withdraw her savings and receive a $300 match to fix her car. “This emergency savings account, with match money, helped me to fix my vehicle and overcome what could have been a major setback for me,” she reflects.

Where can I learn more?

Nadia’s Rainy Day Savings Story After her divorce, Nadia contacted us for help managing money. It was then that she learned about the Rainy Day Savings Account program. Nadia applied and began sav-

Visit our website at newventuresmaine.org or call 207-621-3434.

Unexpected expenses affect everyone! Start saving now to be ready for when you get hit with an emergency expense.

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ESG Funds – Where to Start?

COURTESY OF BIRCHBROOK, FORMERLY DEIGHAN WEALTH ADVISORS

More and more, investors are becoming mindful of the impact their investments have on the world around them. This has led to increased interest in socially responsible and green investing, also known as ESG (environmental, social, and governance) investing. Today, investors have access to more ESG choices, via mutual funds and exchange-traded funds (ETFs), than ever before. While this is good news, it can be confusing to navigate all of the options. Where should an investor start?

First, it is important to determine whether an ESG fund employs negative screening, positive screening, or both. When a fund employs negative screening, it will exclude companies dealing in certain bad behaviors, products, or industries, such as tobacco, alcohol, firearms, or fossil fuels. It might also exclude companies dealing with oppressive governmental regimes or companies that employ child labor, for example. Importantly, an investor shouldn’t assume that a negatively-screened ESG fund will exclude all products or behaviors deemed bad by the investor. In many instances, ESG funds will continue to invest in companies that might be considered unacceptable by certain individuals. To learn what is or isn’t excluded from an ESG fund, an investor should always read the fund’s prospectus. Negative screens will vary from fund to fund.

Negative screening is a good way to remove some of the worst actors from a fund, but it is no guarantee that the remaining companies are good actors making positive steps to improve our climate and society. This is where positive screening can come into play. When a fund employs positive screening, it will include only those companies that meet a certain threshold for good behavior, looking at metrics like carbon output, water usage, workforce diversity, etc. As with negative screening, positive screens have limits. A positively-screened fund will not just include the best actors, it will oftentimes include companies that are simply better than average. In addition, an investor should not assume that a positively-screened fund will consider all factors of interest to that investor. Again, an investor should read a fund’s prospectus to learn which metrics are included in any positive screen, and positive screens will vary from fund to fund.

Because funds are off-the-shelf products that must appeal to a wide range of investors all at once, they cannot always meet the specific ESG goals of every individual. For some investors, a fund might not be the best solution. Rather, it might be necessary to hire an investment manager to construct a personalized portfolio aimed at achieving specific ESG goals.

Lastly, investors must realize there is no standard, agreed-upon definition of ESG, and use of the term is subject to little regulation. Just because two products are labeled ESG, an investor cannot assume the funds are managed in similar ways. An investor also cannot assume a fund will meet her personal goals or standards, simply because it is labeled as ESG. Nevertheless, most ESG funds are held to a higher environmental and social standard than their non-ESG counterparts, and, for investors looking to make a positive change in their investment allocation, ESG funds can be a place to start.