Credit vs Debit

 By: Charlie Bathke

Credits vs debit can be used in two different ways. Credit vs debit within accounting and credit cards vs debit cards. Today I will be describing the differences between credit cards and debit cards and the pros and cons of each, but just for fun, I will add in what credits and debits are in accounting. A debit is an increase of assets or expense accounts and a decrease in liabilities, revenue, or equity accounts. A debit is always positioned on the right side of an entry. On the left side of an entry are credits. A credit is an increase in liabilities, revenue, or equity accounts and a decrease in assets or expense accounts. That is just a very basic overview of what credits and debits are in accounting, now let's talk about credit cards vs debit cards. 

One of the few similarities of credit and debit cards is how they look. They both typically have 16-digit card numbers, expiration dates, and personal identification numbers. They both serve the purpose of making it easy and convenient to make purchases in a store or online. Though they have some similarities, they have many differences which serve as a strength and weakness. 

When making a purchase on a debit card, you can only use the amount of money that is in your bank account and cannot go over that amount. Rather than using a credit card when purchasing an item, it allows you to borrow money to a certain limit, but the more money you owe, the more interest you have to pay. So the main difference between the two is that debit cards don’t allow you to borrow money while credit cards do, so using a debit card makes it much more difficult to overspend since you are limited to the amount of money in your bank account. Credit cards offer fraud protection as purchases must go through the credit card company and if anything that is bought is out of the norm, you will be contacted and the credit card will be suspended till further notice. This is not the same with a debit card as it is linked directly to your bank account, there is not fraud protection. This is one of the main disadvantages of using a debit card. One main difference between the two that doesn’t make much of a difference is whenever you use your debit card, you have to punch in a pin to complete any transaction while with a credit card you just have to swipe your card. 

Now that you have some background information on credit cards and debit cards, which one should you use? Deciding whether you should use a debit card or credit card completely depends on who you are. Most teenagers and younger people use debit cards as it makes it difficult to overspend when using them, you don’t pay interest on purchases, credit history will be unaffected, all purchases will be directly taken out of your bank account immediately which overall makes it easier to manage money. As you get older the better option may be to use a credit card as they give free protection against fraud, gives additional insurance on purchases, makes it easier to do returns and refunds, cards will offer cashback or reward points, and builds your credit score so you can make bigger loans 

I hope that you learned the differences between credit and debit cards and know when to use which depending on the type of person you are! 

                                                                Works Cited

Caldwell, Miriam. “Learn the Difference Between a Credit Card and a Debit Card.” The Balance, 28 July 2020, www.thebalance.com/difference-between-a-credit-card-and-a-debit-card-2385972.

Cussen, Mark P. “What's the Difference Between Credit Cards and Debit Cards?” Investopedia, Investopedia, 26 Jan. 2021, www.investopedia.com/articles/personal-finance/050214/credit-vs-debit-cards-which-better.asp.

50/30/20 ; Saving More & Decreasing Unnecessary Spending

 By: Cheyenne Kaatz 

The 50/30/20 is a smart monthly budgeting method that will tell you how much you put towards your savings each month, and how much you spend on unnecessary things each month. It can also help you keep track of your spendings and how they align with your saving goals for your future. With your monthly budget, you can say on course and avoid overspending and put your money towards better things each time you spend your money. 

What is the 50/30/20 budgeting rule? It is an easy method that helps you manage your money in a simple way; the goal - to help you control your spending and for you to use monthly. The rules are to divide your monthly after-taxes and other fee income into the three spending categories: 50% for needs, 30% for savings, and the 20% for wants or paying of debt. By knowing exactly how much you are spending into each category it will make it easier for you to track expenses and know where you put your money. By keeping your expenses constricted to this budgeting strategy you will no longer be looser with your spending habits, and will ultimately avoid bad spending habits. The 50/30/20 will keep you on track to all your financial goals as they can range to clearing debt or future goals you have for yourself. 

The most important thing is to set aside 50% of your income for essentials. Although this might seem like a high percentage as it will be half your monthly income, most of the important purchases and payments from this section. This category is the things you are forced to pay month to keep you alive while working in your job, these things can include housing, food, transportation costs, and utility bills. Although the costs of these items can vary from person to person, and geological location, it all comes together to maintain a balanced budget. 

The next is the savings that takes up 30% of your budget. Setting money aside for savings monthly can really rack up and be used for other benefits in your life. This can be used for retirement accounts, debt payments, or even other saving plans - these are things that you don’t want to forget about as they will help you in the future. The best thing to use is to input this money into your savings after your essentials (in case something happens that goes over budget) and serves as backup money incase of emergencies. 

The last is the wants in your life, which can take up 20% of your income, this would represent the unnecessary expenses but will enhance your life. Every month you should be able to set aside some money for some things that you want in your life. These things can include, clothes, bill plans for phones, netflix, gym memberships, etc. You can either have the wants in your life as a 20% or a 30% in either category but decreasing it to 20% is best as you would be able to make fewer costs and decrease your overspending amounts. 

Why should I use this plan? According to consumer.gov, a budget helps you make sure you will have enough money every month, and without a budget you will be unorganized and might run out before your paycheck. Using this 50/30/20 rue helps you show and decide what you must spend your money on, and if you can spend less money on some things and more on others (shown in the 50/30/20). You save money for emergencies, expensive things, bills, and your goals - and this budgeting rule helps you keep track of your payments, and prioritize what you spend with your monthly income. 

How do I use the rule? Here is a step-by-step guide to using this budgeting technique. 

1. Calculator your after-tax income 
2. Categorize your spending for the past month
3. Adjust your spendings to match the 50:30:20 rule 
4. Use a 50:30:20 calculator or spreadsheet to crunch numbers.
5. Throughout the month, spend according to the rule but allow yourself money movement through the categories if needed.  
6. Repeat the process every month. 

Should I use this? The first thing you should ask yourself is if this is an appropriate money manager for you. The 50/30/20 creates a zero-sum as you put every dollar you earn monthly towards some specific expense, as this budgeting is used to help you decrease the amount you spend on unnecessary things. But it also provides you with help when unknown expenses pop up or increase as you can use money from the wants and savings categories. The 50/30/20 rule isn't the only budgeting method as you can use the 80/20 or the 70/20/10 rule to set aside your monthly income. What rule would you use? Visit sources like thebalance.com to learn more about these budgeting methods and how they can improve your life. 

Works Cited

Consumer.gov, www.consumer.gov/.

Hancock, John. “Debunking the 50-20-30 Budgeting Rule: John Hancock.” JohnHancock, www.johnhancock.com/ideas-insights/debunking-50-30-20-budgeting-rule.html.

VanSomeren, Lindsay. “Keep Your Budget Simple With the 50/30/20 Rule.” The Balance, 13 Feb. 2021, www.thebalance.com/the-50-30-20-rule-of-thumb-453922.

Whiteside, Eric. “What Is the 50/20/30 Budget Rule?” Investopedia, Investopedia, 28 Jan. 2021, www.investopedia.com/ask/answers/022916/what-502030-budget-rule.asp#:~:text=Senator Elizabeth Warren popularized the,socking away 20% to savings.

How Covid has Affected the Economy and Families Financially?

 By: Nathan Schroeder

March, 2020, our lives as we all knew it was flipped upside down and we didn’t know what had just hit us. The Covid 19 pandemic took everyone by surprise. Sports being cancelled, restaurants being closed, businesses cancelling work days, school shutting down, our lives were put on pause. Confusion, frustration, and a sense of hopelessness set over every single American as a fear of our health and the health of our elders was in jeopardy. Masks, hand sanitizer, protective gear, all became the new normal in order to protect ourselves from this mysterious virus. While our main priority was our health, our economy was crashing and people were losing money like they were just throwing it out of the car on a freeway. The stock market crashed, jobs were lost, people couldn’t work, and no money was circulating. People who were living paycheck to paycheck didn’t know how they would put the next meal on their table. It was very stressful and the pandemic is still showing an impact on families today. 

Due to the pandemic and the shutdown, the U.S. economy took a major hit and was the worst that it has been in awhile. Covid stopped 113 consecutive months of job growth with about 20.5 million jobs being lost in the process. The biggest loss of jobs was in the nation's industrial production which employs nearly 13 million workers. Due to the loss of jobs it slowed down the circulation of money which ultimately caused our economy to take a hit like it had never before in the history of the United States.

With all of the jobs being lost due to the pandemic, it had a major impact on people and families in being able to generate a source of income to be able to pay bills and buy food. At the beginning of the pandemic until now, nearly 70 million Americans had filed for unemployment which makes up for about 40% of the nation's workforce. With this, many jobs were being lost and companies were going out of business. It has questioned many as to how we will get those jobs back so that people are able to get back on their feet and able to provide for themselves. Slowly but surely the unemployment rate over the past couple of months has been declining resulting in more Americans getting jobs and therefore more money being circulated which in the end will help boost our economy. 

Now throughout the pandemic the government had acknowledged the amount of job loss and how much people and families were struggling due to the lack of income and started to come out with stimulus checks. A stimulus check is a check that is sent to a taxpayer from the government in order to stimulate the economy by providing money for citizens. These checks became very hopeful for people who got hit hard by the pandemic and didn’t have enough money to pay rent or buy groceries. The stimulus checks were even sent to people who were still in jobs, and not by the fact that these people needed the money, but the government knew that they would spend, therefore helping businesses that were hurting, overall, boosting the economy.

The pandemic has negatively impacted every American in some way shape or form whether it was physically, mentally, or economically. If we were to take a positive from it or something we can learn, it is that we never know when a financial emergency will take place. Knowing that it is always smart to keep a savings account of money that you are able to tap into in a situation like the pandemic that has caused job loss, stock market crash, and a slowed down economy. 

Works Cited

Bauer, Lauren, et al. “Ten Facts about COVID-19 and the U.S. Economy.” Brookings, 

Brookings, 2 Feb. 2021, www.brookings.edu/research/ten-facts-about-covid-19-and-the-u-s-economy/#:~:te

Kelly, Jack. “803,000 Americans Filed For Unemployment Last Week: 70 Million Sought 

Unemployment Benefits Since The Pandemic.” Forbes, Forbes Magazine, 23 Dec. 

2020

Online Mobile Money Transfer App, Venmo Is Taking Over - No Signs of Slowing Down

 by Grace Lochner

The App Venmo was created in 2009 by Andrew Kortina and Iqram Magdon-Ismail so that they could pay each other without the use of cash or a check. Venmo sends money online, but it isn’t a holding account. Users can connect a debit or credit card to the app, which then can send and withdraw money from the app. As technology continues to advance, Venmo is on a surging storm with over forty-million users--more than some commercial banks. So what is drawing so many people to the app?

Venmo has omitted the use of transaction fees, drawing in college and high school students who may not have their own credit or debit card yet, but may need to exchange money with friends or peers. The revenue for the app comes from the 30 cents and 2.9 percent transaction fee solely for businesses, in addition to the one percent fee for users who want to withdraw money straight from their card. With over two million businesses using the app and accepting transactions as a form of payment from customers, the app is not struggling to see monetary gains.

In addition to a lack of transaction fee for the everyday user, Paypal’s CEO, who also now owns Venmo, Dan Schulman, stated in a 2015 interview that the “secret sauce” is the social aspect of the app where users can use emojis and include little captions with their transactions, and view others purchases or receipts as well. The business of marketing plays a huge role in the draw of  the younger generations, and even turning heads of those in Generation X and the Baby Boomer generation. 

As shown in the graph to the left, Venmo’s revenue has steadily increased since 2015 to over $450 million, the largest surge being between 2019 and 2020, thanks to COVID-19, and most retail becoming almost entirely online for a large period of time. Byrne Hobart from Marker Medium reports, “according to a new survey, 54% of consumers feel concerned about using paper money and coins as a result of Covid-19.” We see manh are adapting to a masked, socially distant lifestyle, some even going as far as to call it the “new normal,” so it is fair to assume that the same can be said with contactless banking and the future of monetary transactions. Not only are companies switching to touch-free payment methods such as Venmo for the health and safety concerns with COVID-19, but also with the unemployment rate at such a high amidst the pandemic, Venmo has created a way for users to accept payment from family and friends while avoiding the in-person banking experience. Overall in the past year the use of Venmo has been surging and helping many people and businesses stay afloat. 

When it comes to banking and the future of banks, Venmo does not completely eliminate the need for them, but it does pose a significant threat to the traditional way of spending money. Digital.hbs.edu states, “historically, banks have relied on large, stable low-cost deposits from customers in order to then offer higher yielding loans and other bank products. In addition, credit cards rely on transaction fees as well as late fees from consumers.” So while the rise of Venmo does not necessarily mean that these revenue sources will completely die, it does mean that the transaction fees and the overall cash flow will be distributed over a larger array of apps, banks, and services. In the future, should Venmo focus on increasing their consumer base, the convenience with the app will increase (as it should with more of the overall population using it), as well as the possibility of increased foreign transactions without fees or the need for cash, and, in turn increased globalization.

Though the rise of the app seemed to have boom within the past year with the CoronaVirus Pandemic, Venmo’s growth has been steadily increasing since its origin in 2009, and there are no signs of slowing down any time soon. 

Works Cited

Gabrielle. “Venmo - Should Banks Be Worried?” Technology and Operations Management, digital.hbs.edu/platform-rctom/submission/venmo-should-banks-be-worried/.

Hobart, Byrne. “No One's Splitting the Bill, But Venmo Is Surging.” Medium, Marker, 9 Sept. 2020, marker.medium.com/no-ones-splitting-the-bill-but-venmo-is-surging-47617013ebb0.

“Venmo Revenue and Usage Statistics (2020).” Business of Apps, 30 Oct. 2020, www.businessofapps.com/data/venmo-statistics/.

High School Job Tax Returns (SUPER Important)

 High School Job Tax Returns (SUPER Important)

Written by: Beau B. 

Things like federal income tax, social security tax, medicare tax, and even state income tax all add up and over time take a nice hefty chunk out of each paycheck. Understanding how to file for a tax return is very important for anyone, but especially high school students! Getting a couple hundred dollars back at the end of the year rocks and for how little work it really is, everyone should do it. 

Initially thinking about doing your own taxes for the first time as a highschool student can seem extremely daunting (trust me I get it), but when it comes down to it, it can be very simple and done in only a few minutes. There is some basic information you’ll need however….

Every employer is required to give their employees a W-2 form (shown to the right) at the end of each year. This is a simple form with all of the essential information you’ll need. The first thing you’ll likely look for on this form is how much money you made in the last year. After a quick pat on the back for all your hard work you’ll begin to see statements in boxes like, “Federal income tax withheld” and “State income tax withheld”. Along with the same for both Social security tax and Medicare income tax. Under these statements will be numbers that represent the total amount of money withheld from your paycheck in the last year for their corresponding tax reason. You might notice that if you add all of those numbers up you’re out a couple hundred bucks from all of your hard work. 

This is why tax returns are so important, as a highschooler making not much more than minimum wage, you’re often able to get much of this money back. You are only technically required to file your tax return if you’ve made $12,200 working in the past year, however, according to the 1040 (which is explained further below) form instructions, “Even if you do not otherwise have to file a return, you should file one to get a refund of any federal income tax withheld.” So essentially, even if you’ve made less than the IRS minimum($12,200) you can get most or all of your withholdings back with a return. 

Now that you know all of the basic information that your W-2 form has provided you, you’re probably wondering how to get your money back. You’ll be thrilled to know that it’s actually fairly simple. The only thing you’ll need is a 1040 form (Linked here) where you should fill out all of the information needed. To me this is the hardest part of the whole process because the 1040 can get a little confusing, but if you just stick to it, you’ll be able to figure everything out. Another option is to use a free online system, I’ve used Turbotax (Linked here), it’s very easy to use, just sign up for a free account and the system will prompt you towards everything you’ll need to know and make the process very simple. Both options are valid but personally I recommend using Turbotax as it’s much more user friendly and intuitive for beginners! Tax return documents can be filed either electronically or via the mail, both work but filing electronically is less time consuming and much more simple.

Hopefully this can help you enjoy the fruits of your labor, happy taxing!

Works Cited

Brantley, Chris. “How to File Taxes as a Full-Time High School Student.” Pocketsense, 10 Jan. 2019, pocketsense.com/file-taxes-fulltime-high-school-student-20419.html.

Faris, Stephanie. “Do High School Students Have to File a Tax Return?” Pocketsense, 30 Oct. 2020, pocketsense.com/high-school-students-file-tax-return-8497.html.

“Free Tax Return Preparation for Qualifying Taxpayers.” Internal Revenue Service, www.irs.gov/individuals/free-tax-return-preparation-for-qualifying-taxpayers.

Stephen Fishman, J.D. “When Does Your Child Have to File a Tax Return?” Www.nolo.com, Nolo, 10 Apr. 2020, www.nolo.com/legal-encyclopedia/when-does-your-child-have-file-tax-return.html.

TurboTax – Taxes, Income Tax. “What Is a W-2 Form?” TurboTax Tax Tips & Videos, turbotax.intuit.com/tax-tips/irs-tax-forms/what-is-a-w-2-form/L6VJbqWl5.

Why Shouldn’t Your Money Sit In a Bank ? (Generating a living off a million dollars)

 by Griffin Goyette 

One of the main issues today is the Americans lack of knowledge on how to make money grow. People work hard for their money to save for retirement but what happens to the money in the bank. When saving money in a bank you generate interest but is this really worth it. A million dollars in a savings account will generate about 1% interest of $10,000 but there are ways to make so much more than that a year without any effort at all. 

One way to make money grow is a municipal bond. This is when you as a citizen use your money as a loan to the government for projects such as building roads. Say you loan them 1 million dollars, you will see a 4-6% increase based on interest on your million dollars in one year. This means you just generated 50,000 untaxed dollars in one year. Bringing in 50,000 cash untaxed dollars is how much somebody with a 70,000 dollar salary brings home after taxes. This is just one way to make your money grow but there are ways to see even larger amounts a year.

If you want to possibly see bigger returns in your money and are willing to take a small risk a Index fund is for you. An index fund is a collective investment in the stock market but there is a much lower risk in this than investing into individual stocks on your own. On average an Index fund brings in 8 to 9% interest which from a million dollar investment is 80,000 to 90,000 dollars. This amount of money a year is a sustainable living wage.

The two methods are very important for Americans to learn because it is an easy way to grow money and retire earlier. It is just as important to save if you don’t save you won’t have any money to invest. Investing in either one of these options can allow for you to live a much more sustainable life. With a million dollars saved you can invest and make three times the average Americans wage for simply doing nothing. Relative to a million dollars this may not seem like a lot but if you bring in 90,000 dollars a year a retired person you probably won't spend all that 90,000 meaning your saving is going to keep growing and if you are still in the work force and extra 90,000 a year can help to retire even earlier and avoid from certain costs in life diggin into your savings. 

This process however is never ending. If you started with a million dollars and saw a 7% Interest rate in just 9 years you will have 2 million dollars doubling your money for simply investing. 

Works Cited 

“Mutual Funds - Guide to Types of Mutual Funds and How They Work.” Corporate Finance Institute, 14 Apr. 2020, corporatefinanceinstitutecom/resources/knowledge/trading -investing /mutual-funds/. 

Phillips, David, and Jk. “How Much Interest Does 1 Million Dollars Earn Per Year?” Engineer Your Finances, 14 Jan. 2021,www.engineeryourfinances.com/2020/11/much -interest-1-million-dollars-earn-per-year/. 

Turning 18 & Financial Stress

 by Gabriela Vasquez

    Turning 18 in the financial world can open doors to new financial opportunities. Even as an underclassman you should be informed about your financial future. Some exciting things you'll be able to do include independently and actively participate in stocks, open a Roth IRA, create a credit account/build credit score, and so much more! I will be discussing important information you should be educated about involving Roth IRAs, credit scores, stocks and how to manage stress relating to these new financial burdens. 

You may have heard your parents or grandparents talk about a Roth IRA; but what exactly is a Roth IRA. According to Schwab.com, “ A Roth IRA is a contribution of after-tax dollars, your money grows tax-free and you can generally make tax- and penalty-free withdrawals after age 59” (Figure 1). Now, this may be confusing at first so let's break it down. Let's say you get your $5,000 paycheck from work. You are taxed (for this example) 20% and are left with $4,000 in the bank. You put $500 in your Roth IRA which buys mutual funds, ETFs, and stocks. Over time when you add more money your Roth IRA will grow. In our example after 30 years your $500 will have turned into $704,275.29 (can all depend on stock market, contributions, etc). Now when you’re ready to retire above age 59, you are able to collect that $704,275.29 tax free (since you paid tax before your contributions). This is important for 18 year olds to know because the sooner you start adding contributions into your Roth IRA, the more money you will be able to collect for retirement. 

Did you know the average American carres $6,194 in credit card debit (Cnbc)? No one wants to be in debit but many will find themselves in debit regardless as seen in figure 2. Credit card debit can be prevented easily. When you apply to get a credit card you are asking your bank to loan money. You will start off with a small cap of money and your cap will increase as you pay back your loaned money. A credit score is a score indicating how reliable you are to repay a loan. A good credit score can get you airline miles, higher spending caps, higher priority when applying for rentals,and insurance and other discounts. When you are 18 you can start applying for credit cards. When you get your credit card it is recommended that you use it for small items you can definity afford when your payment is due. The more you are able to pay back on time, the higher your credit score will be. Many people will not be able to pay back what they owe resulting in a lower credit score and credit card debit. Now that you are educated on why credit cards and scores are important, it is crucial to start increasing your credit score as soon as you can. Applying for credit cards and paying your credit card bills promptly is a good way to ensure a good credit score right off the bat and can increase your quality of life and get benefits. 

Stocks can be a stressor for everyone. Majority of stocks can be predicted but what recent events have shown; the market can be very unpredictable (Figure 3) . Turning 18 means you can independently invest in stocks. When you buy the stock of a company you are simultaneously buying a share in that company. If the stock price goes up then you can sell that share for a greater price than what you bought it as. According to NerdWallet, the long term stock return is 10% which means if you invested $1,000 30 years ago it would be worth over $8,000 today. Investing in stocks can be a good way to grow your money. However, if the stock goes down then you also lose money. Investing in stocks with projected growth is a smart investment for any new investors (us). You must be smart with your money and do research on the history of stocks and others portfolios before you make an investment. The younger you are investing in the stock market, the more money you can ultimately grow. 

All of these financial strategies can become stressful for many. Even just thinking about it might make you anxious. According to HelpGuide, “Financial problems adversely impact your mental health. The stress of debt or other financial issues leaves you feeling depressed or anxious”. Money is a very important factor in life and so it's important to treat it as so. Financial stress can lead to unhealthy positive feedback loops that can be hard to break the cycle as seen in figure 2. It is important to start off with healthy and smart choices so 

we lessen the stress that comes from money. Even with most of us going to college soon, we have to worry about student loans, book prices, etc. It is important to have a budget and keep control of your money or your money will control you. You must create a healthy relationship with money by spending and saving wisely. When overwhelmed with financial stress, talking to a financial advisor might help you get support and advice. Keeping in check with your mental health and understanding when to ask for help is crucial. 

In conclusion I hope this article has given you more insight on upcoming financial opportunities on how to grow your money. I hope you were able to create connections with prior knowledge and relieve questions you might have had. It is our responsibility to take care of our mental health and realize our financial stress to prevent unhealthy loops. I hope you’ve become inspired to take initiative into your financial future. Below I have linked helpful resources if you are interested further. How will you take the initiative of your finances? How will you manage financial/general stress? 

Introduction to Stocks

What Is a Roth IRA? How Roth IRAs Work & How to Start One

Credit Cards 101

Dealing with financial stress

Works Cited

Coombes, Andrea. “Roth IRA: How Roth IRAs Work, How to Start One.” NerdWallet, 2 Feb. 2021, www.nerdwallet.com/article/investing/what-is-a-roth-ira.

“Dealing with Financial Stress.” American Psychological Association, American Psychological Association, www.apa.org/topics/stress/holiday-money.

Lambarena, Melissa. “Credit Cards 101.” NerdWallet, 26 Jan. 2021, www.nerdwallet.com/article/credit-cards/credit-cards-101.

Little, Ken. “An Introduction to Stocks to Get You Started.” The Balance, 28 Nov. 2020, www.thebalance.com/introduction-to-stocks-3141368.

awhite_credit. “Alaskans Carry the Highest Credit Card Balance-Here's the Average Credit Card Balance in Every State.” CNBC, CNBC, 1 Dec. 2020, www.cnbc.com/select/average-credit-card-balance-by-state/.