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.

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.

Investing the right way. How to do it well

Billionaire Warren Buffett is a good example for value investing. Buffett gives a good example of value investing that other people should pay attention to. Buffett recommends that we buy low and sell high. Sadly, many investors tend to let emotion handle their financial decisions. This causes them to buy when others are buying, and sell when others are selling. When we buy when others are buying, we get a high priced Apple stock that is not really a good deal. When we sell when others are selling, we get a trashy Kodak stock that just went bankrupt. The key to becoming the investor that succeeds is being a shareholder in Apple before they became successful. It is selling Kodak stock before the rise of the digital camera. All of these things are what the biggest investors do well.

If you do not know how to begin stock investing, think about something practical in your life that you can try this principle with. A good example is food purchases. Most people are eagerly buying sweet and popular premade meat products. They are eagerly ignoring bitter and unpopular raw vegetable products. A smart investor would buy mostly raw vegetables and sell sweet popular meat products during the day.

The best investment models buy something unpopular, and then they convert it into something very popular. The worst investment models take something popular, and then they convert it into something very unpopular. Evaluating your personal financial practices to see how you are doing in this area can show you the things that need to improve. A person who is smart will take a job that others do not want, and give others exactly what they want. A person who is foolish will take a job that others desperately want, and give others exactly what they do not want.

If you do not know what is popular, look at the universals of marketing. The universals of marketing include survival, protection, freedom, pleasure, relationships, and likability. These are the things we should be selling to be a great investor. We should also be buying danger, slavery, suffering, enemies, and unpopularity to be a great investor. Why? These things have a low purchase price because no one wants them.

There are different great companies to try stock investing cheaply. One of the recent ones is Robinhood. Robinhood lets you place trades from the convenience of your smartphone without having high fees bothering you.

Robinhood puts the investing market in the hands of the common person. If you are curious about how to begin with stock trading, remembering the buy low and sell high principle can go a long way toward removing the issues you are having.

Fast Cash: How to Make Supplementary Income Quickly

When it comes to making fast cash, most of the time, it’s not a good thing. Get rich quick schemes and things that seem too good to be true probably are. However, that doesn’t mean all ways of making fast money is bad. In order to give you a few examples and context, here are a few ways to make some extra money on the side.

Ride Sharing

Apps like Uber and Lyft are providing individuals with the flexibility of an open schedule and their own cars to earn money. Some people have gone as far as giving up more traditional jobs in order to make their own hours and be in charge of their income. Plus, with a job like this, you decide how much you want to earn. You can drive a little or a lot depending on how much supplementary income you’re looking to make.

Selling Old Items

Most people have items in their homes that are no longer of use to them. If you’re in a similar situation, you very well could be sitting on money! Have a yard sale or sell unwanted items online to make a few bucks. Sites like Ebay are great because you may end up receiving much more money than expected. Opening it up to bidding, you could make some serious cash if a few people really need to have your item.

Freelance

Think of a skill you have mastered and odds are there’s a way to make money doing it. Freelancing is one of the best ways to make money using skills you have that others may not. For instance, a lot of businesses need help with logos and design, web design, or content creation and they’re willing to pay for fast help. Try your hand at offering your work for a small fee. As you get better and have more clients, you can begin to charge more and see referrals from happy clients coming your way!

Seasonal Yard Work

Lastly, each season brings a new type of yard work with it. In the winter, driveways need to be shoveled, summer brings landscaping with it, and fall tends to require a lot of leaf cleanup. Not many people enjoy doing these types of yard work and would often pay someone to take care of it for them. Earn a bit of cash by sprucing up someone’s yard – plus, it’s a good workout.