Student loan servicers might give you the wrong information

Our team was alarmed to learn that recently, the Consumer Financial Protection Bureau found that many loan servicers actually give student loan borrowers incorrect or insufficient information about public-service loan forgiveness. There are currently several money-saving options for many student loan borrowers. However, if borrowers are unaware of these options, these programs become useless, and the borrower is left missing out on potentially, significant savings on their monthly student loan payments.

In another alarming moment, in the student loan industry, the U.S. Consumer Financial Protection Bureau and the Illinois and Washington attorneys general sued Navient Corp, the nation’s largest student loan servicer, in January. They lawsuits are alleging that it harmed student loan borrowers throughout the repayment process.

Among other things, the CFPB alleges that since at least January 2010, Navient misallocated payments, steered struggling borrowers toward multiple forbearances instead of income-driven repayment plans, and provided unclear information about how to re-enroll in income-driven repayment plans and how to qualify for a co-signer release. The CFPB is asking Navient to compensate the borrowers the agency says were harmed.

The Illinois and Washington suits make similar claims to the CFPB’s allegations and also allege that Navient, when it was part of Sallie Mae, made subprime loans to students, particularly those attending for-profit schools. Navient broke off from Sallie Mae Bank, one of the largest private student loan lenders, in 2014.

Navient has filed motions to dismiss all three cases and says the suits are based on new servicing standards that are being applied retroactively, according to a March 2017 fact sheet.

The lawsuits could potentially take years to play out “because of the sheer amount of evidence” that the CFPB, Illinois, and Washington have gathered during their investigations, says Suzanne Martindale, a staff attorney at Consumers Union, the policy, and action arm of Consumer Reports.

Regardless of the outcomes, it’s a good idea for borrow’s to regularly check their student loan accounts and make sure their student loans are being serviced correctly. Luckily there are a lot of tools and services that can help borrowers get an overview of current loan balances and repayment options. For more information

 

 

 

 

 

 

Student Loan Forgiveness Programs You Should Know

There are the primary programs our student loans teams say can cancel or reduce your federal loan balance. Qualification is based on your job, the repayment plan you choose and other factors.

Public Service Loan Forgiveness

How it works: Qualifying workers include firefighters, teachers, military personnel and nurses, among others.

Your remaining federal loan balance will be forgiven if you work full time for a nonprofit or the government for at least 10 years. You’ll save the most money on Public Service Loan Forgiveness if you repay your loans on an income-driven plan for those 10 years. The program started in 2007, so the first Public Service Loan Forgiveness recipients will have their loans discharged in 2017.

Which loans are eligible: Only federal direct loans are eligible for the program, but you can consolidate other student loan types in order to repay them on Public Service Loan Forgiveness. Consider keeping your Perkins loans separate if you qualify for Perkins loan cancellation, which we’ll explore further below.

Best for you if: You plan to work in public service for at least 10 years and you’re already on, or are willing to switch to, an income-driven repayment plan.

Here’s why: Since you must still be working in the public interest when you apply for forgiveness — after your 120th loan payment — Public Service Loan Forgiveness is a big commitment. It’s worthwhile only for grads who plan to pursue a career in public service anyway, says Kristin Bhaumik, assistant director for special programs in the University of Michigan’s office of financial aid.

“Ten years is a very long time for most people to plan out their future just for loan forgiveness,” she says.

How to apply: Call your student loan servicer, the company that manages your federal loans, to let it know you’re interested in the program and to confirm that you qualify. The company will tell you if you must consolidate your loans to make them eligible and what initial paperwork you need to fill out.

You and your employer should fill out the employment certification form annually, or whenever you change jobs, to make sure you’re on track for forgiveness. Send the form to FedLoan Servicing, which oversees the program. You’re not required to submit the form every year (though it’s a good idea to do so); you can also apply for forgiveness once you’re eligible and certify your employment retroactively.

The program began on Oct. 1, 2007, so you’re eligible once you’ve made 120 on-time loan payments since that date. The application will be available by October 2017.

Potential changes to consider: Public Service Loan Forgiveness is slated for elimination in the 2018 White House budget, currently awaiting approval by Congress. If included in the final approved budget, the proposal would impact only loans originating on or after July 1, 2018. It would not affect those who are already on track for loan forgiveness.

Income-driven repayment

How it works: The federal government offers four main income-driven repayment plans, which allow you to pay a percentage of your monthly income toward your loans:

Income-based repayment
Income-contingent repayment
Pay As You Earn
Revised Pay As You Earn
All of these programs automatically forgive your remaining loan balance after 20 or 25 years, depending on the plan. Most were designed for borrowers who have a large loan balance relative to their incomes. Revised Pay As You Earn (known as REPAYE), however, is open to any federal student loan borrower, no matter how much you earn.

Which loans are eligible: Loan requirements vary among plans. In general, if a loan type isn’t eligible for income-driven repayment at first, it will be once it’s consolidated into a Direct Consolidation Loan.

Best for you if: You have substantial student loan debt or can afford your payments only on an income-driven plan, and you’re willing to save money for your potential tax bill in the future.

Here’s why: Forgiveness is certainly a benefit of the income-driven plans, but it’s not a reason to sign up for one of them. You’ll accrue more interest on these plans than you would on a standard or graduated repayment schedule, and as tax law is currently written, you’ll be required to pay income taxes on the amount forgiven.

“Borrowers need to plan for that,” says the University of Michigan’s Bhaumik. A tax professional can estimate what you’ll owe upon forgiveness so you can start saving now. But it’s worth the tax bill if repaying your loans on an income-driven plan is the only way you can afford your payments.

“I would rather a borrower take a reduced monthly payment and make that payment on time, every time, than go into delinquency or default,” Bhaumik says.

How to apply: First fill out an Income-Driven Repayment Plan request and return it to your servicer. You must recertify your income every year to stay on the plan you choose. There’s no separate forgiveness application; your loans will be forgiven automatically after 20 or 25 years, depending on the plan.

Financial aid is dependent on the federal budget and higher education law, so changes to the terms of forgiveness programs could take place at any time.

“You’ve got to listen to political conversations surrounding these programs, because so much of it involves the political and public policy climate in the U.S.,” Bhaumik says.

Stay organized and informed, and once you receive forgiveness, you’ll know that lottery-like feeling of being rid of your loans at last.

To qualify for forgiveness, your loans can’t be in default, meaning they’ve gone unpaid for more than nine months. Also, private student loans don’t offer forgiveness, though some lenders will let you make interest-only payments or take a temporary interest rate reduction if you’re having trouble affording your bill. If you have private loans, call your lender to see what options are available to you.

Potential changes to consider: The 2018 White House budget calls for the creation of one income-driven repayment plan to replace the current four plans. Under this proposal, the monthly amount would be 12.5% of a borrower’s discretionary income, and undergraduate borrowers would receive loan forgiveness after 15 years of payments, lowered from the current 20 years. Graduate borrowers would receive forgiveness after 30 years of payments, up from the current 25. To be enacted, this condition would need to be included in the final budget approved by Congress.

Teacher Loan Forgiveness

How it works: Teachers who work full time for five consecutive years can have up to $17,500 in direct or Stafford loans forgiven. The program is available only to teachers who work in low-income public elementary or secondary schools and who took out their first loans after Oct. 1, 1998.

Which loans are eligible: Direct loans and Stafford loans.

Best for you if: You plan to teach full time in a low-income public school for at least five years and have a loan balance of $17,500 or less. If you have a larger loan balance and plan to teach for 15 years or more, consider enrolling in Public Service Loan Forgiveness after five years.

Here’s why: Participants will also qualify for Public Service Loan Forgiveness, which is more generous, but Teacher Loan Forgiveness will reduce or eliminate your loans in half the time: five years instead of 10. Although the two programs can’t overlap, you can take advantage of both if you plan to teach for 15 years or more.

How to apply: Fill out the application after you complete the five-year teaching requirement and send it to your student loan servicer.

Perkins loan cancellation

How it works: Borrowers with federal Perkins loans can have up to 100% of their loans canceled if they work in public service jobs, generally after five years. Teachers, firefighters, nurses, police officers, school librarians and public defenders all qualify, among others. Check this chart to see if your job makes you eligible.

The Perkins loan teacher benefit has some specific guidelines. Teachers must work full time in a low-income public school or teach qualifying subjects like special education, math, science or a foreign language.

Which loans are eligible: Perkins loans only. The total amount of Perkins loans you can borrow as an undergrad is $27,500; as a grad student, you can borrow an additional $32,500.

Best for you if: You have Perkins loans and you plan to work in an eligible public service job for at least one year.

How to apply: Perkins loans are disbursed to you directly by your college. Call the financial aid office and ask for a loan cancellation application. In many cases, your loans will be discharged incrementally each year you serve; for example, you’ll get 15% of your loans canceled your first and second years as a teacher, 20% canceled your third and fourth years and 30% canceled your fifth year. You must show proof that you work in a qualifying public service job during the period you apply for forgiveness.

Other repayment options

If you want to save on the total cost of your loan and you have strong credit as well as a steady income, consider student loan refinancing. When you refinance with a private lender, your current loan is replaced with a new loan at a lower interest rate and a new term; the shorter the term, the more you’ll save.

Refinancing is a good choice for borrowers with private loans or those with federal student loans who don’t plan to use an income-driven repayment plan, federal loan forgiveness programs or other protections. Consider all options and compare offers before refinancing.

The Basics of Money and Credit

In this series, Our team shares their thoughts on the basics of Money and Credit. These topics are typically covered with new customers.

First, let’s start with the basics of credit.

What is Credit?

Credit is other people’s willingness to let you use their money that you will repay sometime in the future.  It is a privilege, not a right. By “other people,” we typically mean banks, credit unions, and credit card companies.

“Credit” can be used interchangeably with “loan.”

How do you earn credit?

To earn the trust of the lenders in the form of “credit, you need to demonstrate you can borrow money and pay back on time. Check out a good article by Nerd Wallet: How to Build Credit

What are the types of credit?

Categorized by how the credit is extended and how it is paid back, credit falls into the following three categories:

Installment Loan: require regular payments, usually monthly, until the principal is paid off. Car loans, student loans, and mortgage all fall in this category.

Revolving Credit: includes bank credit cards, store credit cards, and home equity line of credit. You are required to pay at least the minimum payment by the due date. You can pay the minimum amount, the full payment or anything in-between. You can keep using the credit as long as you pay the minimum and stay within the credit limit.

Service Credit: used for monthly utility bills, such as electricity, gas, and yes, your cell phone bills. You set up an account, use a service and get billed by the service provider.

What Are the Advantages of Credit

You can get instant gratification, “buy now and pay later”;
Usually, no interest is charged when credit card bills are paid in full by due date;
Credit cards are safer to carry around than large sum of cash around;
Keep record of how you spend money so you can analyze your spending habit;
Some credit cards offer “bonuses” such as cash back or frequent flyer miles.

What Are the Disadvantages of Credit

Interest costs can be very high. How high? 15-20% for unpaid credit card balance is very common.
If you only pay the minimum each month, then the pay-off period will extend to very long
Since you owe so much money to other people already, you may not have much buying power left in the future

What is a Credit Report?

Lenders do not take your word for it when they come to determine whether to extend credit to you; instead, they pull your “credit report”.  It is kind of like your “school report” but lists different things. It describes your past use of credit, such as being on time in paying back debt, types of credit accounts opened, number of loans applied for, and a number of outstanding balances.

Three companies, called credit bureaus, gather information about you and give it to lenders. These three companies are:

Equifax (www.equifax.com)
Experian (www.experian.com)
Trans Union (www.transunion.com)

You can order your credit report once a year to check for errors or see if your identity has been stolen. Following the directions that come with the report, you can fix the errors.

What are Credit Scores?

Sometimes referred as a FICO score, a credit score is a three-digit number that describes your trustworthiness, or your future bill-paying behavior. It ranges from 300 to 850.  Lenders look that the number and decide whether to give you a loan and on what terms if any (interest rate, down payments, etc.).

These factors affect your credit score:

Previous payment history
Amount money owed
Number of recent credit inquiries
Length of credit history

These are only a few of the money basics we go over with new clients. If you have any questions or need help in any of the areas we discussed here, please don’t hesitate to reach out for a Free Initial consultation with one of our counselors M-F 9am-5pm pst at 854-888-0321

You Don’t Need That MBA Degree: Continuing Thoughts on Higher Education

 

This is a guest post by Mariana Zanetti, who earned her MBA degree from one of Europe’s top business schools and has more than 12 years of international marketing experience in three countries. She is the author of The MBA Bubble and shared this post in response to an earlier Man Vs. Debt post by Joan titled Do You Really Need That Master’s Degree?

When my Harvard MBA colleague told me that I should pursue a “top” MBA program twelve years ago, I did not doubt it. “Don’t worry,” he said. “For the important things, money will not be a problem.” So I applied, I was admitted, and I enrolled in the MBA program at one of the top European business schools.

Some years later, I met all the professional goals I had set for myself: I had a high-paying and challenging job in a large and prestigious company. However, my MBA was one of the worst mistakes of my life and a huge waste of money. No, I didn’t really need to spend a fortune to get that MBA degree.

My colleague’s advice was well-meant and sincere. But I followed the advice of someone who had not needed to worry about money, as his company had financed his tuition. I learned later that everyone should definitely worry about money and debt, even if going to Harvard.

I am not saying that MBAs are useless, but they are pretty close. Except for a few exceptions, these programs have no influence on the graduates’ careers. Yes, MBAs get higher paying jobs. Yes, the MBA network is a great asset. Yes, you learn some interesting business concepts at business school from brilliant professors. Yes, employers value the degree in your résumé.

 

How can they be a waste of money and effort, then?
Correlation, not causation
Because the MBA is not the cause of professional success, it is only correlated to it. Ferrari owners are correlated to higher income, but the Ferrari is not the cause of their wealth.

It is easy to explain: Business schools only admit people who have already proved that they can have successful careers. The more prestigious (and hell, expensive) the school is, the more competitive and demanding its admission process. Yet the degree adds almost nothing that the student did not already have before enrolling, and there are several studies that already prove this. My wage was higher than the average, but so was the wage of all of my colleagues doing the same work, whether or not they had an MBA. I did not make a proper analysis of the Return On Investment (ROI) of my education.

As for the MBA network, it is completely overrated. You meet great people at the MBA… people like you. You meet people like you everywhere you go, and they do not ask for a certificate to connect with you.

Even if you are persuaded that there is a real advantage to pursuing an MBA, you should really think twice before going into debt to finance the degree. The world has changed a lot, but the MBA content has not. You will only use a small portion of what you learn in the program in your first job after graduation, and five years later, everything you will need to know might have changed.

Much of what you learned in the MBA is going to be obsolete, but the bills will continue arriving. Why don’t you start training yourself, instead? What sense does it make to buy a piece of paper that is constantly losing its value? No, you don’t really need that piece of paper.
But what about employers? Don’t they really value the degree?
They do. An MBA always looks good on a resume. If two candidates for a job meet the requirements, most employers will choose the one who has an MBA. What is the conclusion most professionals come to when seeing this? That the MBA is worth time and money. Wrong damned conclusion!

Employers will choose the MBA candidate… if there is a tie. But there is not going to be any tie if one of the candidates has the experience or the skills they value most. Why would people mortgage their future to buy a tie-breaking joker? Joan asks in her article: “Why on earth would they outlay the money and time [pursuing an MBA] and NOT use it to build toward something that will significantly change their earning potential?”

It is a good question, Joan. I know from experience that most MBA candidates do not even ask themselves this question first, even when most labor market experts say that these programs improve employability in a very marginal way.
If there is little advantage to getting an MBA, why aren’t there more grads with regrets?
There are a lot of people regretting it, mainly when their student-loan bills arrive every month, but they will never say it in a loud voice. There is no sense for them in shouting that the emperor is naked.

That’s why business schools continue with their deceitful marketing messages, playing with the data in the rankings: Very few people will dare to question them officially. Unfortunately, business schools run themselves the same way they teach others to run businesses: Most of them make profit without caring about adding value. This attitude was the origin of the horrible financial crisis of 2008.
So why do so many people still rush to get the degree?
It’s a good question. The truth is that, as everyone is doing it, the “everyone-is-doing-it” pressure increases, as Joan says.

Everyone was buying houses in 2006. Everyone was buying tulips in Holland in 1637, even when they were more expensive than a house on the Amsterdam channels. That is how a financial bubble is formed.

The fact is that MBA programs have increased their prices by 62% since 2005, and they are in the middle of an education bubble that is about to burst.

As Mark Twain said, “Whenever you find yourself on the side of the majority, it is time to pause and reflect.”

No, you really don’t need that degree.

 

Note from Joan: I really loved hearing Mariana’s take on my fairly anti-grad-school rant from earlier this year. It’s amazing to know that someone WITH the degree feels as strongly as I do about not getting it!

I continue to be interested in your thoughts on graduate education. This is (obviously) a topic I’m passionate about!

So what do you think? Is graduate school its own “bubble?”

Would love hear your take in the comments!

Should You Sell Unwanted Gifts?

 

 

One of our readers shared the following story and question with me, and gave me permission to share it here:
I’m trying to downsize and get rid of my crap to pay off my debt.  I also don’t like clutter so I want to get rid of my stuff so my family of 3 can comfortably fit into 1100 square feet. But my father-in-law is the king of crap, and gives us stuff we’ll never use and never need. I have 2 hammocks (and live in an apartment), a circular saw, tons of memorabilia from our alma mater, garden gnomes, at least 3 universal remotes (for my 1 television), water skis, and tons of other stuff I can’t even think about. They were all gifts from him and he’s a very generous person, but in the past we’ve tried to explain to him that we don’t need this stuff and never use it. We would rather he save his money for retirement but told him if he insists on getting us anything, just give us the cash instead. But he doesn’t listen. I would feel bad getting rid of the stuff since it was a gift, but I just can’t use it. Is it OK for me to sell this crap as well? Or am I obligated to keep it since it was a gift?
We’ve talked around this issue here at Man Vs. Debt several times, but never addressed it specifically, so I’m thrilled to be able to share my take on this today.

 

Let me preface this by saying that I don’t think there is one right answer to this question. Is it “OK” to sell a particular item? I probably can’t decide that, but I can help you key into some phrases that might help you walk through the decision!
Obligation
I’m starting at the end of our friendly neighborhood reader’s question: Am I obligated to keep it since it was a gift?

My take on this is that if there is anything in your life that’s there because of obligation only, I encourage you to revisit it.

Gifts: This is the most obvious one, and the one our reader asks about. Does something being a gift mean you’re obligated – that you have to – keep it? I’m a pretty resounding no on this personally.
Time commitments: These are another kind of “obligation.” If you’re doing something that lines up with your priorities and/or that you enjoy, great! But if you’re committed to something – whether leading a Scout troop or attending a monthly potluck with your neighbors or participating in an online class – that you’re only doing because you feel obligated, I encourage you to see whether you can use that time elsewhere!
Hobbies: I’ve written about this before, when I talked about what the Olympics can teach us about expensive hobbies. If something isn’t a good fit for you any more, don’t keep doing it because the money and time you’ve already invested make you feel obligated to continue.

See how obligation turns into a code word for “I don’t want to do this but I don’t know how NOT to” in these situations? I give those other examples because I think they sometimes can be easier to “get” than thinking about tangible gifts.

If you’re at the point of describing something as an obligation, I think it’s pretty clear it isn’t something that otherwise lines up with your life and values.

Now, does that mean you can get rid of it? Generally, I say yes, get rid of things you’re not going to love and use. But sometimes obligations go beyond “I have no practical use for this.” Sometimes, we get into…
Sentimentality
A hammock for your apartment and three remotes for one TV are one thing. But as we branch out beyond our reader’s question to the other kinds of obligations we face when it comes to stuff, what about sentimental gifts? Maybe you’re NEVER going to use that falling-apart coffee table, but it was your grandmother’s! Oh, and what about the necktie you get every year for Father’s Day… even though you don’t wear ties EVER?

You know this type of gift. You’re keeping it because it either DOES mean something – or is supposed to.

In these cases, it’s sometimes harder to pull the trigger on getting rid of an item. One of my favorite Man Vs. Debt guest posts of all time tackled that idea with a sentimental scrapbook – a way to simplify by taking photos or keeping particularly memorable items in a simple form. (I have a T-shirt blanket patched with  my favorite old clothes that serves this purpose, for instance.)

So if you’ve gotten a sentimental gift… I still say it’s OK to let it go. But I do think there’s value in documenting the memory or the story of the item when possible, too!
Avoiding unwanted gifts
Our friendly reader actually tackled this part of the situation as well as I think most people can: He’s already had the conversation with his father-in-law about the unwanted gifts.

That’s hard to do, and the exact dynamics of doing so are going to vary WILDLY from relationship to relationship. In general, though, I think having a conversation about gifts is one of the best ways to avoid the bad feelings of obligation and guilt we talked about above! Some ideas for making such a conversation work:

Don’t make it about the items. Realistically? You pretty much can’t go to someone and say, “Hey, I don’t like the kinds of presents you give me.” That’s kind of not how being human works, right? The conversation you need to have has to be about giving in general, and is a good time to talk about your values, your lifestyle, and your relationship with the giver. “Hey, is it possible for us to talk about scaling back on Christmas this year? We’d love to be able to spend more time with you guys, so what if we all go away overnight instead of buying each other presents?”
Do have some suggestions in mind. Instead of hitting someone with the idea that you “don’t like” kitchen gadgets, or garden gnomes, or designer sweaters, be prepared with some “Hey, this is super-cool!” examples of things you do love. Some families use wish lists, and that can be great. If yours isn’t on board with that idea, even sharing observations while you’re out shopping together, or posting links to things you’re drooling over on shared social networks like Facebook, can be helpful. More times than you might think, you’re getting gifts that aren’t useful to you because your loved ones don’t know what would be!
Don’t get defensive (or offensive). Conversations with family members and friends about gifts can be surprisingly heated. (I mean, if you’ve been friends with someone for a decade and you just now are letting them know that they’ve never gotten your shirt size right, that’s a little rough, yeah?) Don’t get defensive and drop lines like “Well, but you GAVE it to me, so I can do whatever I want with it!” The fact is, someone cared enough to spend some of their money on you. If you can actually use the resulting gift, awesome. But even if you can’t, it’s important to respect the person and the effort.

Selling vs. regifting vs. donating
So far, I’ve studiously just been talking about getting rid of items that you won’t use and don’t want.

Is there a difference between donating an unwanted gift, regifting it, and selling it?

I have to admit, I’ve heard a lot of arguments about this, but in my own experience, I haven’t yet found any reason not to treat a gift the same way I would anything I purchased myself.

In fact, I’m not sure I see how selling a gift you won’t use is any different than returning a sweater in the wrong size to a store and getting a pair of pants instead.

 

Note: This is a post from Joan Concilio, Man Vs. Debt community manager. Read more about Joan.

You Want It. You Buy It. You Forget It.

 

Note: This is a post from Joan Concilio, Man Vs. Debt community manager. Read more about Joan.

Two summers ago, while visiting an art museum in Washington, D.C., we came upon an exhibit in the process of being installed. Huge letters and swaths of red, black and white covered every square inch of wall and floor.

When I saw it, I took the photo above, hoping it would serve as a reminder to go back and see the finished exhibit and revisit the phrases plastered throughout.

WHOSE VALUES?

FORGET EVERYTHING.

YOU WANT IT. YOU BUY IT. YOU FORGET IT.

And while I haven’t gotten back to see the final installation of Belief+Doubt (I hope to – it’s on display through the end of this year!) … the phrases have stuck with me, and I’m reminded of them at the weirdest times.

 
“Where did I get that?”
Like last night. I was balancing my checkbook, a regular weekend occurrence, and I saw a transaction for about $40 that I simply didn’t recall. “What on earth did we buy?” I asked myself…

And earlier in the week, when I was cleaning some clothes out of my closet, hoping to donate a few unneeded things on our next trip to the local Goodwill, I came across a shirt and a pair of pants that weren’t at all familiar to me. “Where did I get that?” I wondered…

I like to think I’m conscious about my spending. If not perfectly so, at least WAY better than when I found Man Vs. Debt at the start of my financial journey, and moreso than at least many of my peers.

Even so, I struggle with the needs-vs-wants mentality. Do I need a new pair of work pants, or a second or third pair of jeans? To see that movie, or to buy that box of organic strawberries? Or are those just wants?

And even when I save and plan and treat myself to a want item, am I really making sure it’s worth it? Or am I in danger of doing exactly what’s plastered on the escalator of that art exhibit?
You want it, you buy it, you forget it?
It’s a common complaint for those of us with children. You know, that loom to make rubber-band bracelets that my daughter had to have, only to have it sit unopened? The same with those silly Littlest Pet Shop figurines when she was 8. Wanted, bought, forgotten.

But you know what? We’re just as guilty of this as adults.

How many times are we sure we have an item that we just can’t find, so we buy another?

How often do we dig into the far reaches of our closet and come out with an item that we didn’t remember having?

That new device comes out that allows us to peel potatoes and stream music at the same time, and we’re positive it’ll revolutionize our time in the kitchen.

(OK, maybe not that last one…)

In all these cases, though, it’s easier than we think to want something, buy it and forget it. Our society tends very much toward the disposable and the replaceable… AKA, the forgettable.

Look, that can be OK. I’m sorry, wasteful or not, I’m glad that I can use paper towels and not cloth ones to clean up after my five cats. Disposable can be good.

But too often, we do things out of knee-jerk reaction. Want. Buy. That’s fine, but if you didn’t put a lot of thought into acquiring something, is it likely you’re going to put a lot of thought into it once you have it?

You want it. You buy it. You forget it.

This is something I’ve been thinking a lot about lately, and would love to hear your thoughts on in the comments.

Does this happen to you?

What do you do to stop the want-buy-forget progression?

6 Wise Strategies to Manage Extra Money From a Pay Raise

Congratulations on your pay raise or bonus. Now it’s time to get serious about how to use that extra money to improve your finances.

Before you’re tempted to spend a windfall on something frivolous, consider how it could be used to create more financial security instead. In this post, I’ll cover 6 strategies to wisely manage extra money so you don’t fritter away an exceptional opportunity to improve your finances and build wealth.
6 Strategies to Manage Extra Money Wisely
One of the first impulses we usually have after getting a bigger paycheck – or any unexpected income for that matter, such as a tax refund or inheritance – is to upgrade your lifestyle. Maybe you’ve been thinking about buying a bigger home, moving into a better apartment, getting a new car, or joining an exclusive gym or country club.

Increasing your expenses to match your income is called lifestyle creep. It’s one of the biggest danger to your financial future because it doesn’t seem like a bad or crazy idea at the time.

You might believe that you deserve to buy something pricey or make a luxurious lifestyle change after working hard for your raise or bonus. And maybe you can afford it on paper.

I’m not saying that you shouldn’t enjoy your additional income. But what I recommend is that you take a hard look at your finances and use this opportunity to strengthen your foundation before committing to a bigger expenses or luxury purchases. Letting extra cash slip through your fingers to finance a more expensive car loan or pay more rent means that you will miss a huge opportunity to build long-lasting wealth.
1. Fortify your emergency fund!
The best way to make sure you’re ready when bad luck strikes, is to prepare for it today. No matter if you have a small unexpected expense, like a car repair, or something major like getting sick or losing your job, you need a financial safety net.

Devastating events are tough enough to handle without also being stressed about money. When you don’t have a financial cushion to soften the blow of a large expense or a loss of income, you end up relying on credit cards.

Yes, it is good to have credit as a last resort, but please understand that it is an expensive option because high interest gets added to your balance every month until you pay the entire balance. For many, using a credit card as an emergency backstop puts you in a huge financial hole that can take decades to climb out of.

This is why your number one financial priority before doing anything else, such as investing or paying down debt, should be to accumulate an emergency fund. Studies show that 46% of Americans could’t come up with $400 to cover an unexpected expense. I don’t want you to be a part of that statistic.

Having at least a couple months’ worth of living expenses and ideally a minimum of 6, on hand gives you a tremendous amount of peace. You’ll know that you’ve got money to deal with just about any distressing situation that blows into your life.

So, if you don’t have a healthy emergency fund sitting safely in a bank savings account, use every bit of your pay raise or bonus to start building one. Get a tax refund? Pile it on top and feel empowered.

Don’t worry if your cash reserves earn little or no interest in the bank. They’re not supposed to. The purpose of emergency savings is to be accessible and liquid in the short term. If you invest your emergency money, the value could shrink to nothing the moment you need it.

 
2. Fill your insurance gaps
In addition to using extra income to create a financial cushion in the bank another critical way to protect yourself and those you love from something unexpected jeopardizing your financial security is having enough of the right types of insurance. Without it, a catastrophic event – such as a health problem, car accident, natural disaster, or a death in your family – could wipe out everything you’ve worked so hard to earn.

It’s not pleasant to think about what bad things could happen, which is precisely why so many people are under insured. But managing different types of risk is easy, in financial sense, because most of them can be transferred to an insurance company.

Health insurance is the most important coverage to have because any kind of medical issue or accident could leave you with a massive bill. Even a quick trip to the emergency room or a short hospital stay could cost thousands of dollars.

No matter what changes the Trump Administration makes to the Affordable Care Act, you still need a health plan to protect both your health and your finances. If you don’t get health insurance through work, use a resource like www.insurancequotes.com or www.healthcare.gov to find out your eligibility for benefits including Obamacare, Medicaid, Medicare, and the Children’s Health Insurance Program (CHIP).

Disability insurance is another important, yet often-overlooked, coverage that every earner should have. It provides a percentage of replacement income if you’re unable to work due to a disability, illness, or accident.

Remember that health insurance only pays a portion of your medical bills; it doesn’t pay for living expenses, like housing or food, if you can’t earn money for an extended period. If you don’t have disability through work (or you do but it’s not sufficient), purchase a policy and have enough emergency money set aside to tide you over until coverage begins.

Life insurance is critical when your death could create a financial hardship for those you leave behind, such as a spouse or children. It can help put kids through college, pay off debt, or just provide daily living expenses.

There are different types of policies, but the most common and least expensive option is term life. It gives one or moe of your beneficiaries a cash benefit if you die during a set period, such as 10-20 years.

Auto insurance is a collection of coverages that protect you and other drivers in your household. A minimum amount of liability is required by most states because it pays for your legal obligations if you damage someone’s property or injure them in an accident.

However, in many cases having minimum liability limit isn’t enough to cover the total value of all your assets if you were involved in a lawsuit. So, review your coverage and use your extra income to boos your coverage when needed.

Homeowners insurance is a requirement when you have a mortgage. It covers the structure of your home and your personal belongings anywhere in the world up to certain limits.

But just like with auto insurance, the liability portion may not be high enough to protect you. It would pay legal or medical expenses if a guest is injured on your property or if you hurt someone off premises and get into a lawsuit.

Renters insurance isn’t a requirement, but it’s one of the best financial safety nets you can have. Not only does it cover your personal belongings up to certain limits anywhere in the world, but you also get liability coverage if someone gets hurt in your rental or you hurt someone off premises. The average annual cost is just $188 per year – that is an insurance bargain.

You work hard to build wealth and have a comfortable life, so remember to protect it from tragedies – like accidents, illness, natural disasters, and theft – by reviewing your insurance needs each year and boosting coverage when needed.
3. Increase retirement account contributions at work
After you’re prepared for the unexpected by having emergency savings and insurance, the next strategy to manage your extra income wisely is to boost your retirement account.

You already know that contributing to you 401k, 403b, or 457 retirement plan at work is a good idea- especially if you’re getting additiona free matching funds from your employer. If your contributions are set as a percentage of income, you’ll automatically save more, and get more matching, as your income goes up.

But if your retirement contribution is a flat dollar amount, such as $50 per paycheck, it won’t increase unless you make the manual change online or through your benefits administrator. Getting a pay raise is the perfect time to kick up your contribution.

If you make $50,000 per year and get a 3% raise, you’ll earn an additional $1,500. That’s an extra $125 per month before taxes. If you contribute that amount every month for 30 years to a traditional retirement account with an average 6% return, it will grow to over $125,000.

5 Ways to Cut Your Grocery Bill

No matter how much you trim the extras out of your budget, there’s one category you can never cut out altogether:food. We all need to eat, but it is possible to stretch your grocery budget and do more with less when it comes to shopping for food. Of course, we all know not to go shopping when hungry and to make a shopping list and stick to it. But there’s so much more you can do to cut your grocery bill. See how many of these ideas you’ll want to try:

Be Flexible- Making a shopping list is tried-and-true trick to saving money on groceries. But within that list, you’ll want to build in some flexibility to find the most savings. For example, if milk is on your list, but not on sale, check out the non-dairy alternatives that might be, such as soy, almond or coconut beverages. Or if you need cereal, but your preferred brand is at full price, look to generic versions or stock up on the varieties that are on sale. Your favorite will come up in the sale rotation before you know it and in the meantime, you might find something you like even better.

Take Care with Coupons- There’s no doubt using coupons can help you save on groceries, but you must use them wisely. Buying something you weren’t planning on buying just because you have a coupon doesn’t really save you anything. Also be careful about using coupons to over-buy. Stockpiling items purchased on sale with coupons might seem like a money-saving move, but unless you know without a doubt you’ll use it all before it goes bad, you could end up throwing food away and wasting money in the process.

Buy In-Season Produce- Thanks to the miracles of modern transportation, you can get just about every type of fruit or vegetable year ’round. But, you’ll save the most – and enjoy the best flavor – when you buy what’s currently in season. This time of year, you’ll want to load your card with melons, berries, soft fruits like peaches and plums, plus tomatoes, corn and cucumbers. Check out this handy guide for which fruits and vegetables to focus on each season.

Consider Grocery Delivery or Pick- Up- Surprisingly, it’s possible to save money on groceries when you have someone else shop for you and deliver it to your door. At first blush, it seems like an indulgence, but service like Amazon Prime Now (delivery) or WalMart Grocery (with curbside pick-up) can help you save in a few ways. In addition to offering competitively priced groceries and weekly sales, you’ll also save time (and time is money, after all), and perhaps most importantly, you will avoid all temptation to make unplanned impulse purchases. Plus, you can take your time browsing and filling your cart online to be sure you’ll have everything you need, which will eliminate those additional last-minute shopping trips during the week.

Buy in Bulk (Sometimes)- Bulk buying is a tricky proposition. On the one hand, you almost always save money on the unit prices of items. But, if you don’t end up using up what you buy, you’re wasting food and money. A few tricks to help you save with bulk buying include: Only buying what you know you and your family already use and like, knowing how to properly store food for the longest shelf life, and splitting what you buy with a friend or family member.

5 Summer Job Ideas for Teachers

If you’re a teacher, you know summer vacation isn’t the life of luxury many people assume it is. In fact, it can be extremely stressful to not receive a regular paycheck during those months off. While many teachers plan and save for summer during the school year, it is still challenging to stretch approximately nine months of pay into covering bills and living expenses for a full year. To help you pad that budget, here are five summer jobs that are just right for teachers. They’ll bring in some extra money and leave time for rest and relaxation. Perfect.

Tutoring and Test Preparation- Your knowledge and teaching experience will service you well as a tutor or test preparation instructor. Whether you offer your services independently or sign with a local learning center, you’ll be doing what you love most- helping kids learn.

Cater Waiter/ Bartender- If you waited tables or tended bar during college, it’s time to brush up on those skills and use them to make some extra money. But rather than getting tied into regular shifts at a restaurant or bar, sign up with a few local catering companies. They will call you when they have work available for parties and other events and it’s up to you to accept or decline, so it’s easy to fit into your schedule.

Special Event Worker- Many of the year’s most anticipated events, concerts and festivals happen during the summertime. And if you get a job as an usher, ticket taker or concession worker at a local venue, you’ll have the chance to see (or at least hear) them for free, and get paid to do so. It’s a great way to stretch your entertainment budget while pocketing some extra cash.

House and Pet Sitting- Want to take a mini vacation and get paid to do it? Offer your services as a house and/ or pet sitter. Staying in someone else’s home for a few days (or longer) while they’re away is a fun way to enjoy a change of scenery without traveling too far. You’re basically getting paid to relax and stream Netflix in air conditioned comfort. What’s better than that?

Online Entrepreneur- Do you have a great sense of style and an eye for bargains? Buying clothing, shoes, handbags and accessories at yard sales, thrift stores or on clearance, then reselling them on eBay or an app like Poshmark or Tuesday can be highly lucrative and doesn’t take much work beyond writing good descriptions and timely mailing of packages.