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Inspired by Khan Academy

Clip 1

Our employees are passionate about educating and helping consumers manage their finances. Not only do they share excitement for the content on the site, but they’re also eager to share their own expertise. In these videos, see our employees give their takes on important personal finance issues. Brian teaches you some best practices for combining family finances. Dilan explains why it’s important to have a good credit score.

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Transcript

Kick Start to Credit

Librarian character: Renter’s checklist! Driver’s license? Check! Letter of Employment? Check! Credit Score?? What is that??

Dilan: You know how before you go on a date, you ask a mutual friend  about the person’s reputation? Your credit score is kind of like that.

Librarian character: Whaaat?

Dilan: Well basically your credit score is one of the tools lending institutions such as banks, credit card companies, mortgage lenders, and even landlords use to figure out whether to give you a loan.

Librarian character: But what is a credit score? Can’t find it!

Dilan: It’s a number  between 300 and 850 that represents your creditworthiness.

Librarian character: What? By who and based off what? I feel quite judged at the moment. Shhh..

Dilan: It’s not a judgment, but it is an important indicator of how you manage your credit. A judgment would be something like you wearing black shoes with a brown belt. Analytical companies such as FICO generate your credit score from a compilation of your payment history, how much you owe, types of credit, and how long you’ve had credit. So for lending institutions it’s like calling up a mutual friend for reference before they go on a date with you.

Financial worker character: Hey FICO, it’s me Joe Big Bank, so I was thinking of giving this guy a mortgage, and like how would you rate him? 3—whaaaat?

Librarian character: These credit scores sound awful. I just won’t get a credit card and therefore, no score! Brilliant!
 
Dilan: False. Whether you like it or not you do have a number. With no credit, it’s a big fat zero because you’ll have no institutional record of your financial reliability. As a result, it’ll actually be harder to get a loan and someone WILL likely have to act as a guarantor for you. And look, I don’t care how happy that guy in that credit report commercial sounds. Having little to no credit is not something you sing to the world about.

Musician character sings:

My credit score is zero, And I can’t get a loan.
My credit score is so low,
That I’m moving back home
Yea!


Dilan: NO! So let’s talk about how to build up credit. Well, you should probably get a credit card. Try to get a general card with a reasonable interest rate. As time goes on, you’ll be able to get cards with more benefits such as travel or gas points. After you have a card, buy something with it that’s reasonable. Don’t go crazy and buy a sports car. Buy something affordable that you’d normally buy with cash anyway. Think groceries, gas, or drinks.

And now for the important part.

Pay it back!

This helps to show your creditors that you’re reliable. BAM! The trick is to keep doing this frequently. Don’t miss payments and when you are behind, it is important to communicate with your company. It’s simple in theory, but the stupid mistakes we make with debt in our 20s could last a long time. So let’s get diligent about credit scores because a bad credit score will last MUCH longer than a bad date.

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Disclaimer

The material provided on this Website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

"The importance of building and keeping a good credit score."

- Dilan G.

Clip 3

Our employees are passionate about educating and helping consumers manage their finances. Not only do they share excitement for the content on the site, but they’re also eager to share their own expertise. In these videos, see our employees give their takes on important personal finance issues. Brian teaches you some best practices for combining family finances. Dilan explains why it’s important to have a good credit score.

Close transcript

Transcript

Did you know the main reason for most separations or divorces is because of financial issues? Let’s take a look at why that is. Traditionally, there have been two ways of managing family funds.

First is what I like to call the OURS approach. In this model there is one checking account in both the spouse’s names. For this example, let’s call them Jane and John. All income goes into this account and all expenses come out of it.

The second way is what I like to call the MINE model. Here, both Jane and John have all their income going into an individual account that they alone use. Household bills and expenses are generally split down the middle in this case.

Interestingly enough, each of these models can put different types of financial stress on any relationship.

For example, stress with the OURS account: John buys something Jane doesn’t think it is a good use of household money. Maybe Jane spends money unexpectedly leading to a budget shortfall. Each person may resent having to ask for permission to buy something from the other.

The stress with the MINE accounts: One partner makes more money than the other, causing hard feelings over who or who not is contributing more to the household. Now you may have wondered which way is best.

When my then fiancé and I were merging our finances over 15 years ago, we thought about how we were going to manage our money. We looked at both these models and thought we could do better than this. We took the best parts of both and created our own.

Here’s how it worked. You could set up three checking accounts in total and name each one of them. The OURS account would be used for any household expenses like: paying your mortgage or rent, automobile expenses, groceries, travel, and of course contributing to your savings.

While the MINE and YOURS accounts would be used for anything either spouse may want personally.
The really cool part about this process is you can also surprise your spouse for birthdays, anniversaries or just because by using your separate account.

So how and why does this work? First- budget to determine your household expenses and the discretionary income left over. Creating a proper budget is another video but you really need to do that.

Then set up 3 checking accounts and 1 savings account. The OURS checking account will have both names on it, where the mine checking account may have John’s name on it with Jane listed as the beneficiary.

While Jane’s account would have her name on it with John listed as the beneficiary. The OURS savings account would have both names on it.

Next, set up all direct deposits to go into the OURS checking account and set up three automatic transfers coming from the OURS checking account to each of the other accounts.

Now the transfer amounts and timing may vary depending on your budget.

For instance, you could transfer money to these other accounts on the 1st and the 15th of each month if that is when you get paid. By following this model, you can limit the amount of financial stress placed on your relationship.

The partner that wants to spend money that the other one doesn’t agree is a true need, that’ll come out of their MINE or YOUR account.

Unexpected spending by one or both won’t impact the household budget because that too will be taken out of the MINE or YOUR account. Neither spouse will ever have to ask permission to spend money because…you guessed it, they would make the purchase from their own personal checking account.
 
Both partner’s feel equal because they are each getting the same amount at the same time of the
month, and they both will be contributing to the household expenses.

This plan has worked for my wife and I for 15 years, and we rarely, if ever, fight about money. This could be a good approach for you. In fact, one of my closest friends confided in me some time ago that he and his wife were considering separation because they were always arguing about money.

After being on this plan for 6 months, they not only don’t argue about money any longer but they have also managed to start building significant savings to be used in the near future for putting a down payment on a home.

Close Disclaimer

Disclaimer

The material provided on this Website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its partners assume no liability for any loss or damage resulting from one's reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment management.

"How to combine and manage your family's finances"

- Brian D.