Is Refinancing Your Student Loans Worth It?

In the past, high school graduates hoping to attend college could only do so if their parents could afford tuition – unless those graduates could purchase it themselves, which was highly unlikely. As such, only the relatively wealthy were able to attend college and ultimately earn a four-year degree or better. A few decades ago, the United States federal government decided to level the proverbial playing field so that less-fortunate secondary school graduates would have just as much of a chance to attend a traditional four-year institution of higher education.

How did the US government manage such a task? Through the National Defense Education Act of 1958, the very first program to link hopeful college students with loans, though only prospective college students seeking certain degrees – education, science, and engineering only – were extended such loans. Less than a decade later, the Higher Education Act of 1965 effectively granted high school graduates and non-traditional students alike the ability to pile on student loans.

Unfortunately, the average 2016 university graduate left with a degree bogged down by $37,172 in debt exclusively from student loans.

Refinancing loans is worthwhile in some situations, though certainly not all

People refinance lines of credit, mortgages, automobile loans, goods secured through private financing agreements, and student loan debts typically to reduce interest rates; the ultimate goal of refinancing debts is to reduce the total amount owed, subtract minimum monthly payments, or to shorten the number of periods remaining that require payments.

Here comes the important question – is refinancing your student loans worth it?

Young people are statistically more risky than their older, more mature counterparts. As such, late teenagers typically have terrible credit scores – if they even have borrowing history, at all – limited credit histories, and are slapped with high interest rates when they take out student loans.

College graduates who’ve established a credit history outside of student loans and improved their ratings are good candidates for refinancing. However, you should only refinance if the APR – annual percentage rate, or the true interest rate charged in a year’s time – is lower than the original loan.

Further, make sure the interest from the potential new loan of yours can be deducted from your tax return – read the fine print carefully and maybe even consider consulting a financial advisor.

Biggest Excuses for Not Starting a Personal Budget

The power and effectiveness of creating a household budget and sticking to it have been proven over and over, yet so many people still find a myriad of excuses as to why they cannot start a budget. Here are few of the most common excuses, and why it is time to push past the wall and take control of your financial health:

TIME CONSTRAINTS: Although taking the time to create an initial budget can be a time-consuming endeavor, once the framework is established, it takes less and less time to maintain and implement moving forward. Time is money, so it is absolutely worth your time to invest a little effort now in order to save more money in the long run.

 

PROCRASTINATION HABITS: It is easy to delay saving and budgeting, but sooner or later this will catch up with you. Don’t let life get in the way of doing the most important thing that you can do today to guarantee future financial health. NOW is the time to sit down and create this invaluable framework of guidance.

 

INCONSISTENT INCOME: Yes, making and sticking to a budget becomes more difficult when the income level varies from month to month. However, the fixed expenses are consistent regardless of inconsistencies in income levels, thus the budgeting is still a necessity. Using an average income in your calculations and building a buffer for the lean months are two common tools.

 

DENYING THE TRUTH: Sitting down to work out a budget can be a scary proposition because it forces you to examine where every penny is going. Yet, that is the point. You will never create a healthy financial life without knowing where all of your money is going each month, so now is the time to take control, regardless of what information you learn. Remember, knowledge is power.

 

BUDGETING IS HARD: Even the most math-deficient individuals can create a basic budget. Don’t be scared off by the fancy spreadsheets and electronic apps that some people use to manage their household finances. There are a number of simple and intuitive programs to assist you in budgeting. For those looking to keep things extra simple, a piece of paper and pen and calculator will suffice.

Wealth Management Disruptive Trends

Rapidly emerging technologies and a myriad of new government regulations have transformed the wealth management industry. As the political and economic landscape continues to shift quickly, financial experts have identified the biggest wealth management disruptive trends of the year:

RETIREMENT CONCERNS

Recent research continues to point to the fact that Americans are woefully unprepared for retirement. As the Baby Boomer generation inches toward retirement, society will continue to see the disastrous effects of this lack of preparation.

FLUID FEES

As financial advisors continue to adjust their fee schedule and practices, the industry as a whole will be left wondering where everyone will land. Regulators are increasingly demanding that advisors provide more transparency and structure in fee assessment.

HOLISTIC FINANCIAL PLANNING

Just as medical trends are going through a holistic approach revolution, the financial sector is also looking at the whole picture when approaching personal economic goals. This new way of financial planning is more goals-based and is inspiring firms to offer a more full-service experience to customers in an effort to encapsulate this holistic trend.

ACCOUNT AGGREGATION

One of the most significant benefits of the increased use of technology in financial planning is the use of account aggregation to assist customers in seeing the big picture. This trend has been supported by the rise of digitization in the industry as well as the launch of robo-advisors.

CLIENT PRIVACY ACCOUNTABILITY

Although the United States is still behind the curve in this development, new European Union regulations have gone into effect in an effort to put pressure on financial firms to do a better job securing data and guaranteeing client privacy.

RISE OF ARTIFICIAL INTELLIGENCE (AI)

The use of AI in financial applications can provide a host of benefits including more effective prospecting and automation of office practices. As the technology continues to develop at a breakneck speed, financial firms will be more aggressive in the implementation of the services to benefit clients.

BLOCKCHAIN EMERGENCE

As the new “it” term in technology, the implications of blockchain are still relatively unknown. However, as the technology continues to evolve and become more honed, financial executives will be quick to capitalize on this trend as a viable way to organize data.

The Difference Between Money Reality and Financial Goals

When you look at where your finances are now, you probably see the gap between your financial reality and your financial dream. In many cases, it might seem as though it will be impossible to bridge that gap and create a new financial reality that encompasses your dreams. The good news is that it’s not impossible. In fact, if you follow the steps outlined below, you could be well on your way to creating your ideal financial reality.

Break Down Big Goals

One of the factors that makes your goals seem so unattainable is the sheer grandiosity of them. But when you break these large goals down into smaller goals that can be attained in intervals, they are much easier to both visualize and achieve.

Let’s say your goal is to buy a house. To break this down into smaller goals, you can:

  • Set a goal to save the downpayment by a certain date
  • Set a goal to start saving the difference between your rent now and your mortgage, insurance, and property tax payments once you buy
  • Set a goal to improve your credit rating, so you get a better interest rate

Let’s look at another example. Say your goal is to pay off $25,000 in student loan debt. You can break this down into the following smaller goals:

  • Start living according to a budget
  • In that budget, set aside 10 percent of your income for student loan repayment
  • Pay off 10 percent of your loan balance this year, 20 percent of the balance next year, and so on

Create Steps for Accomplishing Smaller Goals

Once you’ve determined what the small goals are, you need to come up with a plan for accomplishing each of them. Using an example from above, let’s say you want to save for the downpayment on a house. Your steps toward doing so might be:

  • Save $500 a month
  • Sell any unused vehicles, electronics or other expensive items and put the money toward the downpayment savings
  • Get a part-time job during the holiday season and save your paychecks toward your downpayment

Through the creation of smaller goals and steps to take toward making them a reality, you will create a viable plan for reaching your financial ideals, and you’ll have built-in measures for accountability that keep you on track.

The Best Ways to Establish and Build Credit

Those who have never had credit extended will not have a credit score. This might not seem like a problem for those who have tens or hundreds of thousands saved up, but it can be a problem for anyone who wants to take out a loan. Those with no or poor credit will be stuck paying more in interest when they take out loans. Here are some options that can allow people to start building credit.
Get A Secured Credit Card

This type of credit card has a credit limit that’s secured with a deposit, which can be as low as $500. Other than this fact, cardholders use the card much as they would any other credit card. They make purchases with the card and then pay the card off each month. Keeping this up for a while can help them get to a better credit score and allow them to qualify for an unsecured card.
Become an Authorized User

Those who have a parent, spouse or sibling who have a solid credit score could benefit from this fact as long as the issuer reports authorized users to the credit bureaus. Most banks will allow cardholders to add authorized users to their accounts, regardless of their credit history. The card does not actually get mailed to the authorized user, but should the actual cardholder keep up a solid payment record, it will allow the authorized user to build credit.
Get a Credit Builder Loan

These are loans in which the bank actually leaves the money in a bank account while you pay it off. It’s effectively a savings account of sorts, but the payment information will get reported to the credit bureaus. This means that a person who keeps up with payments will start to build credit up over time.
Get a Cosigner on a Loan

This requires getting someone, usually a family member or a friend with a good credit history, to pay off a loan if you can’t. No one really wants to wreck someone else’s credit, so it’s could be a good idea to only borrow a small amount for which you already have the cash built up to pay it back. Repeated on-time payments will slowly start to build up a higher credit score.

While building up credit can seem like a daunting task, it can be done over time. Making sure that you pay off the minimum amount due each month is key to keeping a credit score after you’ve earned one. Those who keep a high score will benefit by paying less in interest over time.

Basics of Cryptocurrency Investing

Cryptocurrency is not well known among many people, including some who are involved in the finance and investment industries. Many have heard of Bitcoin but don’t exactly know what it is or how it works. Bitcoin was introduced to the public in 2008, but it’s still a mystery as to whether it’s a currency that can be used to buy goods and services or if it’s something else. Before you decide to invest in cryptocurrencies, it’s important that you know what it is and how it works.

Satoshi Nakamoto, the anonymous inventor of Bitcoin, wanted to create a decentralized peer-to-peer digital cash system outside of any centralized banking system. A simple explanation as to how this works is that the Bitcoin network, or any other cryptocurrency network, is made up of peers who make digital Bitcoin transactions between one another. There must be a consensus among the peers who can confirm that a transaction took place.

For instance, if John gives 20 Bitcoins to Jane, then Jane must confirm that this transaction took place, and peers in the network must agree that this transaction happened. Essentially, cryptocurrency like Bitcoin is a place to exchange monetary units that have no intrinsic value, no physical form, and has no centralized structure that controls the supply and demand.

Cryptocurrency is more like a stock than actual currency. When you invest in a cryptocurrency, you are basically buying the equivalent of a tech stock. You can invest and trade cryptocurrencies by purchasing and selling cryptocurrency through an exchange. There are several reputable exchanges that specialize in cryptocurrencies such as Coinbase, Kraken, Poloniex, Bitstamp, and Bitsquare. You should check the exchange’s fee, exchange rates, verification requirements, restrictions, payment methods, and reputation before you start trading with the exchange.

Once you have opened an account with an exchange and linked it to your bank account, buying cryptocurrency is easy. You just need to access the ‘Buy’ button, select payment type and desired amount, then hit the ‘Buy’ button. At that point, your exchange account will be credited with the purchase. You can invest in cryptocurrencies, but you will have to check to see if the exchange you have chosen will allow you to invest. You can also open an account on multiple exchanges and trade between those exchanges. There are many ways you can trade, invest, and make money with cryptocurrency. Find a strategy that works for you and take advantage of this new market.

Major Expenses that Happen During Retirement and How to Prepare

What do you need to include in the retirement expenditure budget? This is a daunting question every retiree must ask themselves. The future remains uncertain, and consequently, plans may not be relevant by the time you retire. Employee Benefit Research Institute (EBRI) found that many people do not try to calculate how much they will need in retirement.

Therefore, it is of paramount importance to prepare early. There are several expenses you need to budget for in retirement. The Bureau of labor statistics (BLS) lists the following as the significant annual expenses for older families.

• Housing
• Transportation
• Food
• Pension and social security
• Healthcare
• Entertainment
• Other expenditures – include personal care products, alcohol, tobacco, education, life and personal insurance, reading among others.

Note that old people from the age of 55 to 64 years tend to spend more than older people from the age 65 to 74 years of age.

How to prepare

There are five steps needed to get your retirement plan on track. Additionally, there are unknowns in the retirement plans, but it should not scare you from making one anyway. It is better to be prepared than to be caught off-guard without a working plan in your old age.

1. First of all, consider your current budget

This is the most challenging step in preparation. However with a current budget then its easier to use it for future projections. If you do not have an existing monthly budget, then make one by recording your monthly expenditure.

For variable expenses, like electricity bills, use the average yearly bill by adding up all monthly bills and dividing the total amount by 12 months. For bills requiring payment other than monthly subscription, like auto insurance payment, divide the total amount by 12 to get monthly expenditure.

2. Secondly, establish your likely expenditure in retirement

Write down the expenses you might incur during retirement. Deduct paid off debts. Be as real as possible. You should include fun items like golfing, eating, travel, ballroom dance lessons, and many more. Then, add up these expenses to your monthly bill. Additionally, you need to use projected spending to calculate estimated expenditure during retirement.

In projected spending, multiply your current income with a certain percentage to give you the retirement needs. However, it is not accurate, but it gives you a rough estimate of your needs during retirement.

Moreover, you should also consider the 80 percent rule which states that you should have a plan of replacing 80 percent of your current income in retirement. You can be more conservative by using the 90 percent rule or 70 percent rule if you feel won’t spend as much.

Further, with your retirement money stashed away you can use the four percent rule which states that you can withdraw four percent of your saving yearly without running it dry.

Finally,
3. Evaluate your retirement planning progress – by instituting benchmarks.
4. Once you decide what to do, Create your plan and make changes if necessary.
5. Revisit your plan often, like yearly, by monitoring your finances.

Lending a Friend Money Can Ruin Relationships

Some would say, lending money should be left to the banks and other financial institutions. However, when a friend or family member is in need, it is oftentimes difficult to turn them away. As a friend, or a genuinely caring and generous person, you may be the type who have no problem helping people out with money in cases of emergency with a promise to pay it back in a reasonable period.

Lending money to friends can become a volatile situation. Once you cross the line and begin to lend money to your friends, you can ruin the relationship altogether, depending on the circumstances of course. There are many scenarios where it may not affect the relationship at all, specifically, if the money is paid back each time, in the exact amount, and the agreed upon date. However, the relationship may begin to suffer if these deal breakers begin to occur over time, more frequently, and with no respect or regard for the agreement to pay the money back.

A friendship is generally based on trust, honesty, support, and reliability. You want your friends to listen well, be there for you in times of stress, need, or simply as a companion. Friends who run into money issues occasionally are easier to lend to than those who seem to always have problems. There’s also other factors such as the type of money issues your friend encounters. Is it the same issue over time? Perhaps, they overspend, or shop too much and end up short and can’t pay their bills? Did they lose a job, go through a divorce, or became ill and lose work wages? You see, there are many legitimate financial issues that can occur at any given time, to literally anyone.

However, if you are constantly bailing your friends out and the money is not paid back in a timely fashion or even with a good explanation, then this is when the relationship may suffer. You may begin to feel used or disrespected. After a long time of waiting to be paid back, your communication with your friend may even suffer, now with the added tension of trying to avoid the “money” topic. The friend who borrowed the money may feel guilty and start avoiding you if they can’t pay you back as promised. They no longer return calls, texts, or emails. The trust in the relationship is now gone and until the money situation is resolved, or until that strain no longer exists, the contact with your friend, soon decreases.

Finally, before lending money to a friend and possibly ruining your relationship, consider two simple things; can you afford to simply just give them the money instead of loaning it? Think about it as charitable giving. If you will not need the money back anytime soon, no matter how much your friend promises to return it, why not just let them have it as say, a gift? The second thing to consider, is a contract the better way to handle the loan? This is ideal for large amounts and for those friends who need an agreement to keep them honest and on track. For example, a loan agreement is the best of action for a business venture or partnership that relies on future earnings or income in order to pay the loan back in full.

Always remember that lending money to a friend falls into a different category then say paying for lunch or for concert tickets. Basically, it can be a bad idea and destroy your relationship once you realize you made a financial mistake and that the loan itself, indicates that the person is now indebted to you and has made a promise to pay it back. When it doesn’t happen as planned, the next step or how you communicate will determine the path of your relationship.

Most Important Pillars of Managing Personal Finances

For many people, money is a difficult area to navigate. Sometimes it’s good to step back and take a hard look at the basics. In order to do so, we’re going to break down three of the most important pillars of personal finance. They include monitoring, educating, and saving. These three areas are at the core of everything to do with money and can help you get into a money-savvy mindset.

Keep a Watchful Eye

The only good way to know what’s happening with your finances is to monitor them. It’s very easy to lose track of spending when not checking in on your accounts. Luckily, most financial institutions make it simple to access accounts and monitor your activity. Online banking services and smartphone applications are a vital tool for everyone’s personal finance. The more you know about your money, how you’re spending it and identifying problem areas, the better equipped you are to improve your financial status.

Stay Educated

Achieving personal finance goals takes a fair amount of planning, understanding of the market, and general know-how. In order to reach a place of stability, it’s imperative to soak up as much knowledge as possible. Learning everything from effective budgeting to best investing practices will only help you succeed. Devoting time and energy to increase your knowledge is one of the best things you can do for yourself and your wallet.

Save Aggressively

Increasing personal wealth comes down to how aggressive of a saving plan you have. There are two things to keep in mind when it comes to saving. The first thing is to save as much of your income as possible. If this means you live like you’re broke – do it! Surviving on less money is excellent motivation to continue building up your savings. The more you save, the easier it becomes to reach financial independence. The second thing to keep in mind is how you save. The best option is using an account that makes it difficult to withdraw money from unless you absolutely need it. Having an account like this will remove the temptation of dipping into savings for unnecessary spending.

Financial Prep When Searching for a New Job

Whether you’re searching for a new job to procure greater happiness or to land a larger salary, you might not think of this quest as a task that you need to financially prepare for. However, you should take certain steps to ensure that this search doesn’t leave you with money problems.

Consider Your Current Position

In the event that you are planning to stay at your current position until you find a new job, then you may not have a tremendous amount of financial concerns. However, this approach isn’t possible in all fields. For example, you may need to constantly take off from work for interviews, which could compromise your position at your current company. Additionally, you may find that a full-time job and a full-time job search are too much to handle together, at least if you want to put your efforts into the latter.

Allocate Some Funds

Going on interviews is probably not something that you think will cost money, but that isn’t always the case. If you are applying for positions where you need to give a lesson or a demonstration at some point in the interview, you will have to purchase materials to put these projects together. Keep in mind that you won’t necessarily get the first job that you interview for. Also, each one might require a different type of lesson or demonstration, meaning that you would have to buy additional supplies.

Account for the Commute

You might not be on a search to have a shorter commute. In fact, you may be considering a longer one or even a long-distance move to get the job of your dreams. Whether you are paying more money for gas or you are flying across the country and staying in hotels for the interviews, you are going to have to put funds toward these endeavors. Longer drivers or days away also means you’ll be paying for meals.

Stock Your Savings

When you know that you’re going to be looking for a new job, the time has come to put as much money into savings as possible. On top of these related costs, new jobs can be precarious. You don’t necessarily have a guarantee of a position for a long period of time, so you want to be prepared in the event that the new job doesn’t work out.

Searching for a new job isn’t a task that many people associate with costs. As you can see, however, you should prepare yourself financially.