Managing Student Loan Debt

Student loans are on the minds of all college grads – recent or not. It is important to have an understanding of your loans and the ways to make them work best with your current and future situations.

Know Your Options

Most lenders offer different repayment options. After all, everyone is not on the same financial ground after school. Discussing repayment options with your lender let’s them know you are serious about paying your loans back in a way that works best for you. Some options are income based repayment plans, graduated plans that increase the monthly payment at different stages, and even consolidating loans. You will not know your options without exploring them first. Become an expert in your debt to make it work with you – not against.

Make Larger Payments

When possible, pay more than the minimum on your monthly payment. It won’t always happen, but when possible it’s a great investment in yourself. Additionally, larger payments cut into your overall debt and save you money on interest in the long run. The sooner you pay off your loans, the less interest can accrue.

Tax Breaks

There are often tax breaks associated with student loan interest. In the U.S. for example, a tax credit is applied for the amount of interest paid the following year. Do yourself a favor and take that amount and apply it directly to your debt. It may be tempting to spend that money, but it’s money you wouldn’t have without your debt. Additionally, using all or some of tax returns can be a great way to take a chunk out your loans. You have already lived without the money, why not pay down your debt with it.

Pay On Time, Every time

Paying consistently and on time is extremely important. Ignoring payments can be extremely detrimental to your credit and will pose other issues down the road. Bad credit can prevent you from buying a car or house. Plus, consistent on time payments provide you with reassurance that your debt is being tackled bit by bit.

Avoid Additional Debt

If you can, try to avoid any additional debt – especially credit card debt. Accruing more debt can only cause more headaches and normally higher interest rates. By keeping your debt down, you are able to tackle one piece of debt before accruing more. It will be inevitable, buying a house or a new car will add onto your debt, but keeping it down for as long as possible will only benefit you in the long run.

Student loans can be a large issue for some people and is important to know what you can do. Stay on top of your debt and it won’t cripple you. Make your debt work with you – not against.

Wealth Management Terms to Know

raoulfraser-wealthmanagement-imageIf you are new to the world of wealth management, or want a better understanding, there is a large list of terms you will need to have a grasp of. The following list will give you an understanding of some of the more prominent terms you may expect to hear. Knowing these terms will also give you the knowledge to ask your wealth advisor questions based on your understanding.

Asset Allocation

Asset allocation is an overall portfolio strategy. This strategy is focused on balancing risk and reward. The delicate balance is achieved by assessing the client’s goals, their tolerance for risky investments, and what they see on the investment horizon.

Capital Appreciation

Capital Appreciation refers to an investment objective. The object signals that a particular client seeks to grow the value of investments over time and are willing to invest in securities that have demonstrated a fair amount of risk. The client has an appreciation for the market and a willingness to take some risk to receive bigger returns.

Consumer Price Index

The consumer price index, or CPI, “is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care.” The CPI can be calculated by taking the price changes for each individual item and averaging them. The goods are then weighted on their importance. CPI is used to understand price changes affiliated with the cost of living.

Equity

Equity is represented by a stock or security with an ownership interest. A client may have equity in a company if they possess a large amount of shares.

Liquidity

Liquidity is used to describe the measure of how much time it will take to turn an investment into cash. A mutual fund would be considered a liquid investment because shares can be traded in at any time. A house or car would be considered an illiquid investment because it takes time to turn that asset around into cash.

Municipal Bonds

Municipal bonds are a debt security issued by any level of state government to finance large scaled projects or renovations. Municipal bonds are often exempt from federal, state, and local taxes.

Preservation of Capital

Preservation of Capital is another investment objective. Preservation of Capital is on the opposite side of the scale opposed to capital appreciation. Preservation of Capital refers to an initiative to maintain the principal value of a client’s investments. The objective is achieved by investing in low risk venture that almost guarantee security.

Risk Tolerance

Risk tolerance refers to a client’s specific tolerance for risky investments. A high risk tolerance, for example, would be willing or able to withstand declines or even loses in an investment. On the other hand, someone with a low risk tolerance would not be interested in taking risk resulting in losses or declines.

Risk can also change depending on a client’s investment timeline. An individual investing for the long term may be willing to see ups and downs.

Share Buyback

Share buybacks are executed by the company in an attempt to reduce the number of shares in the market. Companies can choose to do this for many reasons. The most common are for reducing supply to increase the value of available stocks or even to keep investors from gaining a controlling stake in the company.

Wealth Management and the Millennial Shift

Within the next 5-10 years, Millennials are expected to inherit more than $30 trillion dollars across the board. Once they are in control of a substantial amount of money, they are going to want to invest, but not necessarily the same way their parents did. There will be a shift within the wealth management industry and advisors need to start preparing now.

Impact Investing

A recent survey distributed by The Brookings Institution found that, “84 percent of millennials consider a company’s involvement in social causes when making purchasing decisions.” This finding lends itself to investments as well. Millennials will begin to look into impact investing instead of more traditional investment routes. Wealth managers are going to start seeing a change in investments that align with their clients values.

Skepticism of Wealth Advisors

Wealth advisors will also begin to see a shift in loyalty. Millennials will not necessarily remain with the same wealth advisor as their parents. The reason behind this is due to a general distrust for wealth advisors. Ultimately, it will be wise for wealth managers to explain that they are not the salesman in the sense that Millennials think they are. A good practice is to remain completely transparent in regards to the way the process works.

Wealth managers may need to explain their position and how they only receive commission or bonuses off of overall portfolio growth and not per investment. Gaining a Millennials trust and becoming more of a partner than an advisor will serve the wealth management well as a whole.

Tech Advancements

Technology has always been, and will continue to be, a huge part of the millennial generation. Being the first generation to completely grow up with tech, it has become an integral part of their everyday lives. Millennials are going to start looking for wealth management firms who are able to provide them with online resources and apps to check on their investments. Many firms currently are dragging behind in terms of tech and this may very well become a problem sooner than later.

Reliable apps and websites take time and money to implement. Wealth management companies need to start looking past the horizon to begin developing products and services that will soon be expected of them.

 

 

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