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Guiding New Graduates to Financial Success

New college graduates are on the loose and out building their new work wardrobes for their first job. Are you a proud parent and grandparent? In addition to celebrating with them over parties and gifts, now is the time to give them the gift of financial independence too. As they start their first jobs, you might ask yourself, “Is my child prepared for the financial responsibility that comes with a full-time job and living on their own?” Right from the start, you want them to develop savings priorities and healthy spending habits. Here are some tips to help you point them in the right direction:

Explain the importance of saving

As young adults start receiving a paycheck, they may find it tempting to spend their funds a lot more on “wants” rather than “needs.” You can help by reminding them of the difference between the two and sharing the importance of saving. Whether it’s saving for unexpected expenses and emergencies or to eventually buy a car or home, encourage your young adult to put a set amount aside from every paycheck. You may also tell them to check with their employer and see if they can direct the savings portion of their paycheck directly into a savings account with only the remainder going to their checking account for spending.

Emphasize retirement contributions

New graduates hardly think about retirement. They’ve just entered the workforce – why would they need to think about an event that will impact them 40+ years from now? With rent, bills and other responsibilities, your young adult may choose not to contribute to their retirement right out of school. We all know that this is a mistake! This is your chance to emphasize how a long retirement time horizon can benefit them financially. Educate them about compounding growth in savings and encourage them to speak to their employer about any professional guidance offered. Emphasize to them that they have one of the greatest assets working for them at this age: time.

Teach them to follow a budget

Budgeting allows young adults to create a spending plan with their money. It’s a great way for them to track their expenses and see if they have enough to spend on the things they really enjoy. Budgeting can keep your young adult focused on their money goals and avoid any unnecessary financial hassle. If they become overwhelmed, share how you learned to live within your paycheck and show them that there are apps and online tools today that they can use – here are just a few examples.

Show them how to pay bills on time

As an independent adult, your child will need to take on lots of responsibility quickly. Perhaps this includes regularly paying a variety of bills (rent, cell phone, etc.). Keeping track of when bills are due can become cumbersome for those just starting out. Show your child that it’s crucial to stay on top of bills and pay them on time. Late payments and fees – and any outstanding interest on balances – will deplete their disposable income, leaving them less money to spend on entertainment and fun. Many apps and computer programs exist to help set reminders and automatic payments. Help your young adult look at the options and share any systems you use to manage monthly payments.

Help them build credit

Many college grads have not yet had a chance to establish a credit history. Educate them about how a credit score can impact their future. A good credit score can influence their ability to get car loans and mortgages approved. Their credit score can also impact the interest rates on these loans: A good credit score may lead to lower interest rates. Some employers use a credit check in their hiring process. Some insurance companies also use credit scores as part of their underwriting process as a person’s credit can be a predictor of insurance claims. To help your young adult build their credit score, encourage them to pay bills on time, avoid acquiring too much debt on any open credit cards, limit the number of credit cards used, and keep their oldest credit card open.

Now that your graduate is officially launched, use some of your time together to pass on good financial habits. Whether it’s dedicating a portion of every paycheck to savings or using an app to track spending, these tips may help your young adult to stay on top of their finances and develop good money habits that can last a lifetime.

Bank Balance Sheet

A balance sheet of a bank shows all financial operations conducted by a bank for a certain period of time. It reveals the borrowed funds by them, their own funds, their sources, their placements in credit and other transactions.

It is recorded in the two ways. In the left part (asset) all assets are reflected and in the right (passive) – liabilities and capital of the bank are positioned. An asset is anything that can be old whereas a liability is an obligation of the financial institution that must be eventually paid back. The owner’s equity in a bank is often referred to as bank capital, which is the remaining amount when all assets have been sold and all liabilities have been paid. The relationship of all balance sheet components can be simply described by the following equation.

Bank Assets = Bank Liabilities + Bank Capital

Assets earn revenue and include:

-Cash in hand;

-Funds on correspondent accounts;

-Funds in reserve funds of the bank;

-Granted loans to legal entities and individuals; (client loan portfolio)

-Interbank loans granted;

-Government bonds;

-Commercial securities;

Depending on the nature of the sources of funds, all liabilities differ in terms of their duration and cost. The main sources of funds as a rule, are deposits of individuals and legal entities, and in addition, funds of central (national) banks and loans obtained from other commercial banks.

Liabilities:

-Funds of banks and other credit institutions;

-Clients accounts, including household deposits;

– The promissory notes issued by the bank;

By using liabilities the owners of banks can leverage their capital to earn much more value than would otherwise be possible using only the bank’s capital.

Also, Central banks regulate bank liabilities by setting mandatory reserve requirements from attracted deposits or by imposing administrative restrictions or incentives.

Assets and liabilities are further distinguished as being either current or long-term. Current assets are assets expected to be sold or otherwise converted to cash within 1 year; otherwise, the assets are long-term. Current liabilities are expected to be paid within 1 year; otherwise, the liabilities are long-term. Current assets and current liabilities are important in assessing liquidity of bank. The deduction of Current assets from Current liabilities gives us a working capital. It is a measure of liquidity. An excess in Working capital a bank is able to meet its short- term liabilities

Three Ideas for Spring Cleaning Your Finances

Your taxes have just been filed and now it’s time for spring cleaning – clearing out the dirt and clutter in your homes and work space to allow for a chore-free summer. Why not also use this opportunity to “clean” up your finances? With a little annual clean-up and our three ideas, you can keep your current financial situation well-organized, streamlined and up-to-date.

Clear the document clutter

We are all human and sometimes accumulate piles of important documents and statements. Now is the time to look through your financial documents and consider which to keep and which to discard. Keep recurring documents, such as investment and bank statements, property and casualty insurance renewals or social security and retirement statements, for one year. You need only keep household bills and credit card statements until you have a record that the bill was paid (unless you need these statements as evidence for tax filing or proof of purchase). Shred all outdated and unnecessary statements.

Try organizing your saved documents into a folder with the newest date on top. This way, if you go looking for a specific document, you won’t shuffle through a year’s worth of back up. Maybe, you prefer storing everything digitally. If so, consider naming folders starting with the year, followed by the two-digit month and ending with the name of the institution or document. This keeps the files sorted in an easy, chronological order. Remember, all electronic files should be backed up regularly, whether stored locally or in the cloud. These days, there are plenty of that will sync your devices and securely back up your storage.

When you pare down and keep only what is necessary – for tax purposes and tracking financial records – you’ll have less clutter and a better understanding of what is in your possession.

Consolidate retirement accounts

How many retirement accounts have you accumulated? Throughout your career, you may have switched employers and acquired multiple retirement accounts. You’re not alone: Many people have aging 401(k)s, IRAs and other retirement accounts of convenience. Talk about financial clutter! Now is a great time to consolidate these. IRAs, SEP IRAs and SIMPLE IRAs can all be consolidated into a single IRA. (Roth IRAs can only combine with other Roth IRAs.) Old 401(k)s can also be rolled into your IRA. When distributing an old 401(k) into your IRA, be sure to review the investment options and expenses in the 401(k) as compared to what is available in your IRA. Combining multiple accounts, may save you fees and most certainly will save you paperwork. Most importantly, you and your advisor can more easily and strategically invest your retirement account for today and the future. When it comes time to take withdrawals, calculations and taxes will be much easier as well.

Update your critical information

Finally, as you begin to clear the financial clutter, you may have various accounts and people who have changed since the last time you organized. That’s why this is a great time to record all your critical information in one central location. We like to call this your critical records organizer. If you already have your information in one organizer, maybe your information is outdated or professionals have changed. Use this spring cleaning time to review the information and make updates. If you have never organized your important information, you should include all your current account numbers, access information and professional contacts. You might like to keep this information in hard copy or choose a mobile app (such as 1Password) or cloud-based document service (such as Dropbox). Creating a central location of this information is not only useful for you each year, it might become critical for your family. You might have account information and professionals in your life that you interact with, but the rest of your family may not know how to contact. Once you update and organize your critical information, remember to let the important people in your family know where they can find this information for the future.

Spring cleaning your finances doesn’t have to be an exhausting process. By keeping important account statements in one place, tossing recurring documents, and shredding unnecessary or outdated personal paperwork, you can clear the document clutter in your life. Consolidating multiple accounts that have lingered over time, will bring you fresh confidence and control over your nest egg, and updating your information in a central location keeps you protected for the future.