Ask Karen Gibbs

Veteran business correspondent Karen Gibbs answers your personal money questions and addresses current topics that affect YOUR finances on a daily basis. Karen is the financial expert in your corner--no question is too basic or too small. Karen boils down the issues simply: here's what you need to know, and here's what you need to do. Send your money questions to AskKaren@mpt.org and post your comments below.

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Hi Karen, how do I go about finding a financial planner?
    Larry, Pikesville

Larry, a financial planner is a professional who will work with you to develop a plan that’s just for you.  He or she should be a trusted information source and advisor, understanding your goals and your risk tolerance.

There is no one size fits all.  Each person and goal is different.  You should feel as comfortable with your financial planner as you do with your doctor.  Your financial planner should be an expert in savings, investing, retirement and estate planning, insurance and taxes.  They should also have the letters CFP on their business card, signifying that they have taken and passed courses offered by the Certified Financial Planner Board of Standards, a non-profit organization based in Washington, D.C.

A financial planner will assist you in creating a budget, help you create an investment portfolio, provide insight and recommendations and help you make ...

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zero percentHi Karen, I’ve been offered a credit card with zero interest for 12-months.  I want to transfer the balance from an existing card charging 19.9%.  Will this affect my credit?
-    Lillian, Baltimore

Lillian, in the short run, you may see a slight dip in your credit score if you transfer your credit card balance.  That’s because new accounts are 10% of your credit score.  But if the credit limit on the new account is higher than your existing account, you could see a rise in your score, as your credit limit-to-debt ratio (which accounts for 30% of your credit score) would improve.

But more importantly, you will save on interest payments.  According to the Federal Reserve, credit card debt is the third largest household debt behind mortgage and student loan debt.  Average debt for all U.S. households is $7,128.  If you consider only households carrying credit card debt, that number jumps to $15,279.  Average credit card interest ...

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dollar-cost averagingHi Karen, I’m serious about starting to invest in 2014.  What is dollar-cost averaging and how will it help me reach my goals?
    -Jack, Carroll County

Jack, dollar-cost averaging is an investing strategy that regularly invests a certain amount of money no matter what the market is doing.  By putting a little bit of money to work for you every month (or every quarter-your choice), you can minimize the emotional risks of an uncertain or volatile market.

Since no one knows when the market is going to go up or down, you’re not trying to “time the market” but able to buy more shares when the price is low and fewer shares when the market is high, not only reducing your risk but helping you to avoid investor’s regret.

Dollar-cost averaging is what you do when you invest in your employer sponsored savings plan.  Every paycheck you devote a little money to the designated investment plan, no matter the price.  It’s the same if ...

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December

Easing Holiday Financial Stress

Karen Gibbs

santa pig

Karen, the holidays are here and I’m already feeling stressed out.  How can I minimize the stress that comes with the holidays?
    -Tara, Emmitsburg, MD

Tara, I know the feeling all too well.  The pressure to shop, cook and entertain can work your last nerve.  You can manage the holiday stress by deciding what’s important to you and letting go of all the rest.

Managing expectations is one way to limit stress.  If you’re hosting the family dinner, know that something is going to go wrong:  the sink or the toilet will clog, someone is going to get sick, a favorite dish is going to break, and the same arguments that surface at every gathering will arise once more.  It’s time for deep breaths and lots of patience (and a trip to the hardware store for a plumber’s snake ahead of time).

First off, put shopping into perspective.  Make a budget and a list and stick to both.  Hopefully you’ve saved money throughout ...

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Karen, how do I go about creating a budget?
    Nick, Towson

Nick, great question!  This is the first step on the road to financial security.  Simply put, a budget gives you an idea of your spending habits.  Once you know where your money is going, you can make adjustments to meet your goals.

Start by itemizing every penny of monthly income.  Total all your paystubs, stipends and other reliable sources of cash.  That’s the amount you have to work with.

Now, list your monthly fixed costs – costs that you must pay each month such as rent, electricity and gas service, phone, cable, insurance, transportation to and from work, groceries and minimum credit card payments. 

Next, list your variable costs; expenses such as lunch, entertainment, shopping, ATM fees, and the like.  You can go old school and track it with pen and paper or new school using free budgeting and personal finance apps and online tools.  It may help to average ...

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