Credit & Debt

Smart Strategies for Coping With Student Loan Debt

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Paying them down and managing their financial impact.

Is student loan debt weighing on the economy?

Probably. Total student loan debt in America is now around $1.5 trillion, having tripled since 2008. The average indebted college graduate leaves campus owing nearly $40,000, and the mean monthly student loan payment for borrowers aged 30 and younger is about $350. (1,2)

The latest Federal Reserve snapshot shows 44.2 million Americans dealing with lingering education loans. The housing sector feels the strain: in a recent National Association of Realtors survey, 85% of non-homeowners aged 22-35 cited education loans as their main obstacle to buying a house. Eight percent of student loan holders fail to get home loans because of their credit scores, the NAR notes; that percentage could rise because the Brookings Institution forecasts that 40% of student loan borrowers will default on their education debts by 2023. (1,3)

If you carry sizable education debt, how can you plan to pay it off?

If you are young (or not so young), budgeting is key. Even if you get a second job, a promotion, or an inheritance, you won’t be able to erase any debt if your expenses consistently exceed your income. Smartphone apps and other online budget tools can help you live within your budget day to day or even at the point of purchase for goods and services.

After that first step, you can use a few different strategies to whittle away at college loans.

  1. The local economy permitting, a couple can live on one salary and use the wages of the other earner to pay off the loan balance(s).
  2. You could use your tax refund to attack the debt.
  3. You can hold off on a major purchase or two. (Yes, this is a sad effect of college debt, but it could also help you reduce it by freeing up more cash to apply to the loan.)
  4. You can sell something of significant value – a car or truck, a motorbike, jewelry, collectibles – and turn the cash on the debt.

Now in the big picture of your budget.

You could try the “snowball method” where you focus on paying off your smallest debt first, then the next smallest, etc., on to the largest. Or, you could try the “debt ladder” tactic, where you attack the debt(s) with the highest interest rate(s) to start. That will permit you to gradually devote more and more money toward the goal of wiping out that existing student loan balance.

Even just paying more than the minimum each month on your loan will help.

Making payments every two weeks rather than every month can also have a big impact.

If a lender presents you with a choice of repayment plans, weigh the one you currently use against the others; the others might be better. Signing up for automatic payments can help, too. You avoid the risk of penalty for late payment, and student loan issuers commonly reward the move by lowering the interest rate on a loan by a quarter-point. (4)

What if you have multiple outstanding college loans?

If one of them has a variable interest rate, try addressing that one first. Why? The interest rate on it may rise with time.

Also, how about combining multiple federal student loan balances into one? That is another option. While this requires a consolidation fee, it also leaves you with one payment, perhaps at a lower interest rate than some of the old loans had. If you have multiple private-sector loans, refinancing is an option. Refinancing could lower the interest rate and trim the monthly payment. The downside is that you may end up with variable interest rates. (5)

Maybe your boss could help you pay down the loan.

Some companies are doing just that for their workers, simply to be competitive today. According to the Society for Human Resource Management, 4% of employers offer this perk. Six percent of firms with 500-10,000 workers now provide some form of student loan repayment assistance. (6)

To reduce your student debt, live within your means and use your financial creativity. It may disappear faster than you think.

Need Additional Help?

Visit the Student Loan Borrowers Assistance website. The National Consumer Law Center’s Student Loan Borrower Assistance Project is a resource for borrowers, their families, and advocates representing student loan borrowers.

Sources

  1. studentloanhero.com/student-loan-debt-statistics/
  2. cnbc.com/2018/05/24/students-would-drop-out-of-college-to-avoid-more-debt.html
  3. cnbc.com/2018/04/19/student-loan-debt-can-make-buying-a-home-almost-impossible.html
  4. nerdwallet.com/blog/loans/student-loans/auto-pay-student-loans/
  5. investorplace.com/2017/06/how-to-navigate-your-student-loan-debt/
  6. shrm.org/resourcesandtools/hr-topics/benefits/pages/student-loan-assistance-benefit.aspx

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

What Do Rising Interest Rates Mean for You? (The Upside and The Downside)

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Interest rates are rising.

The Federal Reserve has hiked the benchmark interest rate twice this year, and it expects to make two more hikes before 2019 arrives. It projects the federal funds rate will approach 3.5% by 2020. (1)

Are you retired, or about to retire?

You will be happy to know rates of return are improving on fixed-income investments. Take 1-year certificates of deposit, for example. Back in 2015, most of them were yielding 0.25%. Now their return is around 2.3%. Money market funds and even deposit accounts should soon feature slightly higher interest rates. The downside of this? If fixed-income investments grow increasingly attractive, investors may pull money out of equities. (4)

Do you have a lot of credit card debt?

The APR on your credit cards should continue to rise in response to the Fed’s moves. (2)

Do you have a fixed-rate mortgage?

You are unaffected. If you have an adjustable-rate mortgage, your payments may reset higher at the start of the next adjustment period. (3)

Are you a business owner seeking a short-term loan?

Try to arrange financing now. The cost of short-term borrowing increases when the Fed hikes. (2)

Do you own a business that sells high-end merchandise?

Your sales may be impacted. Higher interest rates force consumers to put more money toward debt. That means less disposable income to spend on the good life.

Sources

  1. bondbuyer.com/articles/fed-raises-rates-officials-boost-outlook-to-four-hikes-in-2018
  2. smallbusiness.chron.com/interest-rates-affect-businesses-67152.html
  3. tinyurl.com/y74tqh6q
  4. marketwatch.com/story/rising-interest-rates-give-retirees-good-news-and-bad-news-2018-06-20

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

3 Important Personal Finance Tasks for September [VIDEO]

Here are three things you should be doing this month to keep your financial life on track:

#1 Review Your Credit Report

For the second time this year, download a copy of your credit report from http://www.Annualcreditreport.com. Just remember that each of the bureaus will only give you one free copy a year, so if you received a copy from Equifax in May, pull your report from either TransUnion or Experian now.

#2 Gauge Your Tolerance For Risk

Once a year you want to check your tolerance for risk. “Risk Tolerance is an important component in investing. An individual should have a realistic understanding of his or her ability and willingness to stomach large swings in the value of his or her investments. Investors who take on too much risk may panic and sell at the wrong time” – Investopedia. Market conditions, your age or life events could affect your risk tolerance this this so it’s good to gauge where you are at to determine if changes to your portfolio are necessary. Use my free tool to gauge your current comfort for risk: http://bit.ly/YourRiskNumber

#3 Review Your Asset Allocation

You should have set up the assets allocation in your portfolio at the beginning of the year. Now, you want to check in to see if any of the allocations have drifted and if you need to make any adjustments. If you’re not comfortable doing this yourself I advise you to talk to your CERTIFIED FINANCIAL PLANNER™ and he or she will be able to help you making smart decisions.

Sources:
1.http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
2.http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
3.http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

3 Smart Financial Moves For August [VIDEO]

#1 Check Your Credit Score

It’s that time again: Review your credit score at http://www.CreditKarma.com, paying special attention to any fraudulent charges, so you can report it to your credit card company.

#2 Review Your Insurance

Review your auto and homeowners insurance coverage and to shop around. Make an appointment with your agent, or go online and see what other insurers charge for similar coverage.

#3 Review Your Benefits

Review your current benefits situation. Each fall, employees have a brief window of time when they can make changes to their insurance policies or set up and adjust contributions to health savings accounts (HSAs) and flexible spending accounts (FSAs). Check out any new options that are available and decide whether you should make any switches

Sources:
1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

3 Important Financial Tasks To Do May

While you are making plans for that memorial day cook out, schedule some time this month to take care of these important tasks to help keep your financial life on track.

#1 Check Your Credit Score

It’s a good idea to check your credit score several times throughout the year. You want to make sure you there aren’t any errors which may have caused your credit score to take a hit or you haven’t been the victim of fraud. I recommend using CreditKarma.com to check your credit score for free. You will need to sign up and answer several security questions to get access to your information but in my opinion it’s the best spot to go.

TIP: Go to CreditKarma.com to get your credit score for free!

#2 Check Your Credit Report

Your credit report is different from your credit score. The credit score is a numerical value based on information you can find in your credit report. The report will show you the record of your financial activity that’s available to creditors. You can get a copy of your report for free from AnnualCreditReport.com. Check the report for any errors or unusual activity. If you do find anything inaccurate or suspicious you’ll want to contact the agency that released the report to try and get that cleaned up. Keep in mind that there are 3 credit reporting agencies: Equifax, Experian, and Transunion. Each agency is required to provide 1 free report every year. So, the smart move is to request your free report from one agency this month, then 4 months later request from another agency. If you spread the reporting out throughout the year you’ll will do a much better job of staying on top of any credit issues than if you get them all at once.

Tip: Go to AnnualCreditReport.com to get your free credit reports!

#3 Check Your Beneficiary Designations

This is one of the most overlooked financial tasks. Not sure what a beneficiary designation is? The designated beneficiary is the person selected by an owner of a retirement account to inherit the retirement account balance. Oftentimes people select their beneficiary (or ignore it completely) when they open their accounts but never go back to update that information over time. You want to be sure your money will go to the right people should something happen to you. That can change over time due to births, deaths, divorce, etc. So, be sure to check any insurance policies, 401(k)s, IRAs and other retirement plans and make sure the people listed to inherit your assets are in fact the people you still want the to get your money. If you haven’t even selected anyone, now is the time to it. By making the selection your assets will go to the right people, avoid probate and be less of a headache for those you care about when you are not around.

Organize&OptimizeCover

For more financial planning tips, download my free report: “8 Steps to Organize and Optimize Your Financial Life”. Thanks for reading!

 

 

Sources:
1. http://www.learnvest.com/knowledge-center/your-january-2016-financial-to-dos/
2. http://money.usnews.com/money/personal-finance/articles/2014/12/02/your-end-of-year-financial-checklist
3. http://www.forbes.com/sites/learnvest/2013/01/04/your-financial-to-dos-for-every-month-in-2013/#14fe6d3d41d4

The Golden Rule for Financial Success

This seemingly simple task is nearly impossible for many of us to do consistently and successfully. But, if you learn the rule early and stick to it, you will be well on your way toward financial freedom. So, what is the Golden Rule? Spend less than you earn.

Spend < Earn

Many of you working with us already know the rule. However, be sure to share this essential advice with your kids and grandkids to help set them up for financial success.

If this is the first time you are hearing this advice, pay attention. Spending less than you earn is the first step toward creating a REAL financial strategy. If you spend more than you make the only place you can go is into debt. When your debt becomes unmanageable you lose your financial independence. This means you may have trouble affording to do the things in life you want to.

The Benefits

When you spend less than you earn you can have money to:

My Advice

Regularly set aside money the same way you would pay any other bill. By doing this, you carve out savings from what you earn as if it were an expense.

“Never Spend Your Money Before You Have It” -Thomas Jefferson

Think of it as the cost of purchasing your financial freedom! As a rule of thumb, aim to save at least 10% of what you make.

What to Do if You are in Debt?

If you are deep in debt, get educated about your money and create a plan to dig out. You will need to find ways to:

  • Decrease your expenses
  • Maximize your savings

Online tools like First Step Cash Management, YouNeedaBudget.com, and Mint.com can help you monitor and control your cash flow. In addition, clients of Weiss Financial Group can track their spending in their Secure Client Website. I’ve found that these online tools really help you understand where your money is going so you can make informed decisions about your spending habits.

Video:

If you know anyone that could benefit from this advice, feel free to share this video with them. Good luck on your journey toward financial independence.

For more financial planning tips, download my free report: “8 Steps to Organize and Optimize Your Financial Life”. Thanks for reading!