Managing Your Money


Pay Yourself First

Give yourself the benefits of banking

Whatever your goals – a concert next month, a convertible next year, or a condo in 10 years -- getting there will require a smart saving plan. It all begins with paying yourself first. And that begins at the bank. 


Today’s banks offer so many ways to manage your money. Online and ATM convenience makes it easier than ever to perfect your saving and spending habits. So choose the accounts that work best for you, and let’s get started!

Create a Budget

Start knowing where your money’s going

How much money did you spend last week? The week before? Like most people, you probably remember the larger purchases, but there’s still a lot of money you really can’t account for…money that somehow disappears. Your first step toward money mastery is to know where it goes. A budget is a clear and simple way to plan for how you will use your money. Begin by tracking all your transactions for at least one week. You can create a spreadsheet on your computer, use a sheet of paper, or start here and now with the budget worksheet from our Know More section. List what money came in (from odd jobs, part-time work, allowance, gifts), what you spent (bus pass, school snacks, movies, cell phone, clothes, etc.), then compare. You will clearly see which ‘needs’ must be paid for, which ‘wants’ can be eliminated, and you will be on your way to making good money management choices.


Why Banks Offer Interest

As your savings grow so does your bank

Chances are you already have a savings account, so you know it’s a convenient and safe place to keep your money. It’s also a smart place, because banks pay you interest for keeping your money there. Banks provide this incentive in order to grow. Savings that are deposited in the bank’s care are used for loans other customers may need for autos, mortgages, college or other expenses. The interest the bank charges for loans is greater than the interest it pays savers, so the banks can profit as they help you (and borrowers) reach financial goals. That’s a win-win-win situation. And it gets even better for you, because most banks will also pay you interest on the interest your savings earn. That’s called compound interest, which we explain in the next section.


Need to make a withdrawal? No worries – your money will always be there when you need it. Your savings are protected by the federal government, with FDIC insurance for up to $250,000.

Compound Interest

Now things get really interest-ing


There are two kinds of interest banks may offer savers:

  • Simple Interest – based on a small percentage of the money you deposit

  • Compound Interest – based on your deposits plus the interest you have also earned

Compound interest is a powerful saving tool, because it does all the work for you. Even if you never make another deposit, your savings will grow. There are two factors that affect compounding: time and treasure. The longer you keep money in the bank (time) the more its interest is compounded. And the larger your savings (treasure) the greater the amount of compound interest it earns.


But what if you have a really big savings goal – such as one million dollars. How long would it take for compound interest to help you save that much? A lot quicker than you might think, depending on how much you can save each month, and on your interest rate. Check it out on the ‘Who Wants to be a Millionaire’ chart in the Know More section.

The Rule of 72

Double your savings through interest alone

The great genius Albert Einstein called compound interest “the most powerful force in the universe.” In fact, Professor Einstein developed a way to calculate just how fast you can double your savings, through compound interest alone. Here’s how it works: simply divide the number 72 by the annual interest rate of your savings. For instance, $400 at 3% interest would take 24 years to become $800. The higher the interest rate, the faster your savings double – without you depositing a single dollar. Pure genius! And savings grow even faster when you make regular deposits.


Saving Your Money

Benefits you can bank on

Whether you have an account with a brick and mortar bank branch, or do all your banking online, every financial institution needs deposits in order to make loans and grow. The longer they have use of savers’ money, the more interest they are willing to pay them. So banks offer a range of savings account types, with different features, terms and interest rates. Here are the most popular types of savings instruments:

  • Traditional Savings Account – Good for short and long-term savings. You earn interest on deposits, and there are no minimum deposit requirements. You have instant access to your money by making a withdrawal at any time. Your savings account may have a passbook, or you may receive a statement in the mail each month. Many savings accounts come with a debit card, which gives you the added convenience of ATM usage.

  • Money Market Deposit Accounts (MMDAs) – Better for long-term savings. Banks offer higher interest rates on these accounts, because they expect you to keep your savings relatively untouched. You are usually limited to six withdrawals per month, and you may be charged a service fee if you don’t keep a minimum amount on deposit.

  • Certificates of Deposit (CDs) – Best for long-term savings. When you open this account you agree to leave your money untouched for a specific length of time. In return the bank offers you a higher rate of interest than on other accounts. CDs can offer terms of three months up to six years, at a locked-in interest rate. The longer your term, the higher your interest rate may be. But there is usually a sizeable penalty if you withdraw money before your CD’s maturity date.

*Bank products, such as certificates of deposit and savings accounts, are considered short-term, liquid investments. The bank may impose penalties for early withdrawal.

Paying for Purchases

Account worth checking into

Debit cards and ATM cards are rapidly replacing checks for daily transactions. We’ll discuss them in the credit section. But although lots of teens consider them old-fashioned, the fact is a checking account gives you practical, hands-on experience with managing your financial life. Checking accounts are a safe and convenient way to buy stuff, pay bills, and eliminate the risk of carrying lots of cash around. The convenience comes with responsibility though: you must keep track of all your transactions, always know your account balance, and never write a check for more money than you have in your account. To do so will incur penalty fees for each ‘bounced check’ and may also hurt your credit rating.

  • Basic Checking Account – Good for everyday money management. You can deposit or withdraw money at any time, and can access cash by writing a check or by using a linked debit or ATM card. There are usually no minimum deposit or balance requirements, and if you shop around you can probably find an account with no monthly or check processing fees.

  • Interest-Bearing Checking Accounts – If you think you can maintain higher balances, this type of account offers extra perks. The larger your balance, the higher the interest rate you receive. But remember, if you fall below the minimum required balance, you may be charged penalty fees.

  • Student Checking Accounts - These teen-friendly accounts feature low balance requirements, fewer fees, plus debit card and online banking convenience. Just make sure your account has no strings attached, such as direct deposit or minimum activity requirements, or the need to enroll in other programs such as overdraft protection.

Keeping the Records Straight

Double your savings through interest alone

The great genius Albert Einstein called compound interest “the most powerful force in the universe.” In fact, Professor Einstein developed a way to calculate just how fast you can double your savings, through compound interest alone. Here’s how it works: simply divide the number 72 by the annual interest rate of your savings. For instance, $400 at 3% interest would take 24 years to become $800. The higher the interest rate, the faster your savings double – without you depositing a single dollar. Pure genius! And savings grow even faster when you make regular deposits.


Credit, Debit & ATM Cards

The Era of Cashless Purchases

Back in the good old days (before 2003), most people used cash to pay for the things they bought. But for more than a decade, credit and debit cards have surpassed cash as the purchasing methods of choice.


If you received gift cards, or use a debit card with your checking account, then you’ve already begun making cashless transactions. But you’ll have to wait until you turn 18 to apply for a credit card. And until you turn 21, you’ll need an adult co-signer who promises to be responsible for any debt you don’t pay. Still, many high school seniors already have credit cards, and if you’re not one of them it’s a good bet there is one in your future. So the sooner you understand the basics of cashless purchases, the better equipped you are to make informed decisions not only on what you buy, but how you buy it.


Credit Cards 101

Know what you owe

When you pay for a purchase with a credit card you are actually borrowing money from the card issuer – whether it be a bank, credit union, department store, gas company, etc. Their money is paying for your purchase, and you must pay them back. You will be sent a bill listing the total amount you owe, plus the minimum payment you may make. If you pay in full and on time, you will owe your card issuer nothing else. But, if you pay only part of your total (even if it’s more than the minimum amount), then like all loans, you will be charged interest each month for the amount that you still owe.

Credit Comes at a Price

Minimum Payment = finance charge

Let’s face it – credit card issuers aren’t doing this just to be nice. They make a profit on their services. That’s because the majority of Americans carry a balance on their accounts for months or years. And that adds up to whopping amounts of finance charges paid to their card issuers.

The minimum monthly payment is the amount of money you must pay in order to keep your credit card active. It is a small percentage of your entire balance. And you need to know that once that small payment is subtracted from your balance, you will be accumulating finance charges on the remaining amount you owe. In other words, if you make an on-time minimum payment every single month, you will end up having paid much more than the amount you originally spent. For example:


You owe $300. Your card issuer charges 17% interest, and requires a 2% minimum monthly payment. If you never charge another item on that account, and faithfully make minimum payments every month, it will still take you 40 months to pay off your bill in full, and you will have paid an extra $93 in interest. In other words, if you charged a tablet in your freshman year, you’d be paying for it until you were a second semester senior!


How much can cashless purchases end up costing you? Use our credit calculator in the Know More section and see for yourself.


Paying Your Bill

Late? Not Great!

When you get your credit card bill, you usually have about 25 days to pay it. This is called your grace period. If you pay your bill in full within this time, you won’t have to pay any finance charges.


Is your payment late? Or worse – did you miss making a payment? Expect to be charged a penalty – twice! You’ll be charged a late fee (up to $35), plus a penalty interest rate hike that can send your interest soaring to almost 30%...or higher, according to an article in US News.com.


Thanks to the Credit Card Act of 2009, the rate increase can’t be applied to existing balances (unless your payment is late by 60 days or more.) You must be notified of the new rate 45 days days before it goes into effect. But unfortunately, the law does not place a cap on interest rates, so the greater a risk you appear to be to your creditors, the higher the rate they’ll charge you. Bottom line: pay on time, every time. It’s the best thing you can do for your credit rating and your wallet.

Creating Your Credit History

You're not just charging, you're being scored


Every bill you pay – not just credit cards, but cell phones, rent, whatever -- becomes part of your credit history, and impacts how easily you can borrow money in the future. A solid credit history will enable you to get auto and home mortgage loans at a good rate. Credit reporting companies carefully track your payment patterns and provide that information to credit card companies, banks, and even employers.

In addition to credit reports, you will be given a credit score (also called a FICO score) that reflects:

  • Payment history

  • How much you owe

  • The length of your payment history

  • What kinds of credit you use

  • New credit applications


Scores range from 350 to 850, and the higher your score, the better a prospect you are for credit and loans. Late payments will drop your FICO score, but establishing and maintaining good payment patterns will raise it.

Golden Rules of Good Credit

3 Things to Remember

It takes practice to become a good money manager. But you can be well on your way to being a credit card champ, if you avoid the three most common mistakes that teens (and adults) make:

  • Consider before your charge. A credit card is not free money – it’s a loan that you are ultimately making to yourself. Don’t buy on credit unless you know you can pay for your purchase soon. And don’t open too many credit cards – try to keep it to three, max.

  • Pay on time every time. Disorganization is way too expensive – it can result in hefty penalty fees and damage to your credit rating. Always know when your bills are due, and always pay within the grace period.

  • Pay more than the minimum. Paying your bill in full is the most cost-effective way to use your credit card. But if that’s not possible, paying extra each month will help you pay off your debt faster, and ultimately save you a lot of money.

Credit Card Pros and Cons

The advantages and disadvantages of using credit


  • Convenience – no need to keep lots of cash with you.

  • Buy Now – you are able to pay for purchases at any time, even if you don’t have the cash on hand.

  • Use Anywhere – online, in stores, restaurants.

  • Purchase Protection – most card issuers offer safeguards against identity theft and product disputes.

  • Build Credit – responsible use of credit cards helps establish a good credit history. Good for emergencies and unforeseen contingencies.


  • Blowing the Budget - it’s way too easy to spend beyond your ability to repay.

  • Interest Charges – items you buy automatically become more expensive if you add finance and late payment fees.

  • Too Much Debt – using more than one card, or charging too often, can quickly create balances you can’t handle; and as your balances grow so will your minimum monthly payments.

  • Extra Fees – cash advances, transfers, and yearly card renewals mean additional costs.

  • Losing Track – if you don’t save receipts and check account activity religiously you can lose sight (and control) of your financial situation.

ATM & Debit Cards 101

Using your own, not a loan

Unlike a credit card, which is like a loan, there are cards which enable you to use your own money for transactions. These include ATM, debit and prepaid cards.

ATM Cards

When you open your checking account, you’ll probably also get an ATM (Automated Teller Machine) card, which gives you direct access to the money in your account. You can withdraw cash or make deposits anytime (and practically anywhere), without ever having to enter a bank. If you’ve ever walked down a street or gone to a mall you don’t need to be reminded of how many ATMs are around. Each of them is owned by a specific bank. And though you can use any ATM you like, if it doesn’t belong your bank, you will be charged a fee. As you might have discovered, those can add up pretty fast.


Another thing that can add up fast – the amount of cash you take out of your account. Be sure to note down every withdrawal you make, or you’ll find yourself overdrawn, and racking up some hefty penalty fees.

Debit Cards

It looks like a credit card. It’s convenient like a credit card. You can use it to buy stuff like a credit card. But a debit card has a major difference: rather than postponing payment until a future time, the debit card immediately removes the money for your purchase from your checking account and transfers it to the store’s account. This makes it even more important to record every purchase and cash withdrawal, and deduct it from your account balance, so you know at all times how much is left in your account.


Bottom line: keep a firm grip on your receipts. Get into the ‘subtract-as-you-shop’ habit, so you always know your remaining balance. And don’t use a debit card unless you’re positive you have the funds in your account to cover. The store’s processor will discover immediately if you don’t have enough. Besides being embarrassed, you may be charged penalties by your bank.

Prepaid Gift Cards

These stored-value debit cards aren’t linked to a checking account. Instead, they are ‘pre-loaded’ or prepaid with a certain amount of money. You can use a gift card pretty much like a debit card, making purchases and cash withdrawals online, in stores, at ATMs, until you’ve used up your balance. Then you can either dispose of the card, or reload it, often online or by phone. Account activity can be tracked online, and these cards can be a safe and easy way to begin building your budgeting biceps and money management muscles. If you’re thinking of buying prepaid cards as gifts (or for yourself, as a safe, convenient alternative to cash), be sure to shop around for a card that charges no fees (or very small ones).

Have questions about foundation planning?

Learn how we can help.

This communication strictly intended for individuals residing in the states of CA, CT, DC, FL, IL, IN, MA, MD, ME, NC, NH, NJ, NY, RI, SC, TX, VA, VT, WA. No offers may be made or accepted from any resident outside these states due to various state regulations and registration requirements regarding investment products and services. Investments are not FDIC- or NCUA-insured, are not guaranteed by a bank/financial institution, and are subject to risks, including possible loss of the principal invested. Securities and advisory services offered through Commonwealth Financial Network®, Member FINRASIPC, a Registered Investment Advisor.

Privacy Policy.

Copyright © Wealth Planning Resources 2019.

  • WPR Linkedin
  • WPR Facebook
  • WPR Twitter

Wealth Planning Resources

Main Office

460 Totten Pond Road 

Suite 600

Waltham, MA 02451

Call us: 781.547.5620

Duxbury Office

289 St. George Street

Suite 208

Duxbury, MA 02332


Market Update

Market Update for the Quarter Ending December 31, 2020

Presented by John B. Steiger, CFP®™, AIF® 

Strong December caps off solid year for markets

Markets continued to rally in December. The Nasdaq Composite led the way with a 5.71 percent gain for the month. The S&P 500 gained 3.84 percent, and the Dow Jones Industrial Average (DJIA) rose by 3.41 percent. These results contributed to a strong quarter for markets. The Nasdaq returned 15.63 percent while the S&P 500 gained 12.15 percent and the DJIA returned 10.73 percent. For the year, DJIA gained 9.72 percent, the S&P 500 returned 18.40 percent, and the Nasdaq gained 44.92 percent.


These strong results coincided with improving fundamentals. According to Bloomberg Intelligence, as of December 24 with 99 percent of companies having reported, the blended third-quarter earnings decline for the S&P 500 came in at 6.9 percent. This result is significantly better than the initial forecast for a 21.5 percent decline.


Technical factors were also supportive. All three major indices remained above their respective 200-day moving averages for the sixth consecutive month, indicating technical support for markets throughout the second half of the year.


International markets also finished the year strong. The MSCI EAFE Index gained 4.65 percent in December, which contributed to the 16.05 percent increase during the quarter and a 7.82 percent annual gain. The MSCI Emerging Markets Index gained 7.40 percent during the month, 19.77 percent for the quarter, and 18.69 percent for the year. Technicals were supportive for international markets at year-end, with both indices finishing December above their 200-day moving averages.


Fixed income markets also ended the year with positive results. The Bloomberg Barclays U.S. Aggregate Bond Index gained 0.14 percent during the month, 0.67 percent for the quarter, and an impressive 7.51 percent for the year. The 3-month U.S. Treasury yield fell from 1.54 percent at the start of the year to 0.09 percent at year-end. Long-term rates also fell. The 10-year began the year at 1.88 percent and dropped to 0.93 percent by year-end.


High-yield fixed income returned 1.88 percent during the month, 6.45 percent for the quarter, and 7.11 percent for the year. High-yield credit spreads finished the year at 3.87 percent—an improvement from the pandemic-induced high of 10.87 percent in March.


Signs of pandemic progress   

We saw signs of progress on the public health front during the month. New cases per day showed improvement at month-end, although it’s likely the holidays contributed to a lull in reporting. If case growth is in fact slowing, we could see a peak in the next few weeks.


Testing also showed some improvement. A slowdown in testing around the holidays led to the positive test rate increasing modestly at month-end, however. The positive test rate finished the month below the recent highs we’ve seen during the third wave, which is a good sign.


Another positive development was the start of the public vaccination process. The number of vaccinations was relatively low at year-end, but the pace should pick up as state and local governments build out the necessary public health infrastructure.


Economic headwinds remain
The third wave still presents risks to the economic recovery. Retail sales and personal spending fell in November, highlighting the headwinds created by increased shutdown measures. As you can see in Figure 1, this was the first drop for personal spending since initial lockdowns were lifted in April. There is hope that the second stimulus bill and continued public health progress will spur spending growth.

Figure 1. Personal Consumer Expenditures, December 2018-Present






Business confidence and spending held up well despite rising case counts. Both manufacturer and service sector confidence remain near or above pre-pandemic levels. These strong confidence figures have translated into faster spending and output growth.

Risks moderate to start 2021

December’s updates highlighted the risks presented by rising case counts and increased local restrictions. But the resilient economy, combined with the expected tailwinds from additional stimulus and further public health progress, indicates we are in a relatively good place to start the year. Given the short-term uncertainty, a well-diversified portfolio that matches investor goals and timelines remains the best path forward for most. But if concerns remain, contact your financial advisor to review your financial plan.

All information according to Bloomberg, unless stated otherwise.


Disclosure: Certain sections of this commentary contain forward-looking statements based on our reasonable expectations, estimates, projections, and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not indicative of future results. Diversification does not assure a profit or protect against loss in declining markets. All indices are unmanaged and investors cannot invest directly into an index. The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip stocks. The S&P 500 Index is a broad-based measurement of changes in stock market conditions based on the average performance of 500 widely held common stocks. The Nasdaq Composite Index measures the performance of all issues listed in the Nasdaq Stock Market, except for rights, warrants, units, and convertible debentures. The MSCI EAFE Index is a float-adjusted market capitalization index designed to measure developed market equity performance, excluding the U.S. and Canada. The MSCI Emerging Markets Index is a market capitalization-weighted index composed of companies representative of the market structure of 26 emerging market countries in Europe, Latin America, and the Pacific Basin. It excludes closed markets and those shares in otherwise free markets that are not purchasable by foreigners. The Bloomberg Barclays Aggregate Bond Index is an unmanaged market value-weighted index representing securities that are SEC-registered, taxable, and dollar-denominated. It covers the U.S. investment-grade fixed-rate bond market, with index components for a combination of the Bloomberg Barclays government and corporate securities, mortgage-backed pass-through securities, and asset-backed securities. The Bloomberg Barclays U.S. Corporate High Yield Index covers the USD-denominated, non-investment-grade, fixed-rate, taxable corporate bond market. Securities are classified as high-yield if the middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below


John B. Steiger is a financial professional with Wealth Planning Resources, LLC at 460 Totten Pond Road ,Suite 600 ,Waltham, MA 02451.  He offers securities as a Registered Representative of Commonwealth Financial Network®, Member FINRA/SIPC. He can be reached at  781.547.5621 or at  john@wprplanning.com.

Authored by Brad McMillan, CFA®, CAIA, MAI, managing principal, chief investment officer, and Sam Millette, senior investment research analyst, at Commonwealth Financial Network®.

© 2020 Commonwealth Financial Network®