Showing results for the tag: #debt Show All Articles

Tips for Minimizing Student Debt

Tips for Minimizing Student Debt

From guidance counselors and parents to your soccer coach and nosy neighbors, everyone seems to be interested in where you’re planning on going to college. And with good reason — there’s a lot to consider when making this important decision, beyond just picking the right university or vocational school and figuring out your major. Education costs money … a lot of it. But with some practical planning, there are ways to rein in college costs even if your college fund hasn’t caught up with your dreams quite yet.

Figure out What You’ve Got to Work With

Have the “money talk” with your parents. Find out if they — or your grandparents — have funds put aside for you like a tax-advantaged 529 college savings plan. If they do, know that the impact on your financial aid is different based on whether your parents or your grandparents started the account. And don’t forget to ask for money toward your college fund for birthday presents and holiday gifts to bolster your savings.

Stretch Your Budget

Rather than going straight to a four-year school, consider spending your first year or two at a community college. Community college can cost much less — plus, you could potentially save on living expenses by commuting. You can then transfer to the school of your dreams in a year or two to dig into your major.

Plan Your Way Out of a Jam

Talk to your college advisor about the feasibility of graduating early. Look into concurrent enrollment programs that allow you to take reduced-cost college classes while in high school. AP testing and CLEP tests can also help you receive credit at a reduced rate and speed up your graduation date. Graduating even one semester early can save you thousands of dollars in tuition, housing and other expenses.

Scholarships Are Free Money

In addition to academic and sports scholarships, there are also community-based, gender and subject area scholarships. Once you’re in college, you can work with your major department or honor society to take advantage of these programs. Look into smaller scholarships as well. Sometimes they’re easier to get, and a lot of small scholarships can add up to more money. And don’t forget about grants if you have financial need. Many states and colleges offer their own need-based grant, research and scholarship programs that you can apply for.

Work-study and Summer Jobs

Instead of taking out more student loans, look for opportunities to participate in federal work-study. These are programs that provide you work during the semester and can help you reduce the need for debt. A summer job can build up your resume and help toward paying your college expenses for the coming year.

Get Ahead of Debt

Make sure you fill out the Free Application for Federal Student Aid each year to take advantage of grants, work-study and some scholarships. Speak with a financial professional to help you take steps now to sidestep serious debt and make your transition into life on your own as smooth as possible.

Tips for Minimizing Student Debt

Tips for Minimizing Student Debt

From guidance counselors and parents to your soccer coach and nosy neighbors, everyone seems to be interested in where you’re planning on going to college. And with good reason — there’s a lot to consider when making this important decision, beyond just picking the right university or vocational school and figuring out your major. Education costs money … a lot of it. But with some practical planning, there are ways to rein in college costs even if your college fund hasn’t caught up with your dreams quite yet.

Figure out What You’ve Got to Work With

Have the “money talk” with your parents. Find out if they — or your grandparents — have funds put aside for you like a tax-advantaged 529 college savings plan. If they do, know that the impact on your financial aid is different based on whether your parents or your grandparents started the account. And don’t forget to ask for money toward your college fund for birthday presents and holiday gifts to bolster your savings.

Stretch Your Budget

Rather than going straight to a four-year school, consider spending your first year or two at a community college. Community college can cost much less — plus, you could potentially save on living expenses by commuting. You can then transfer to the school of your dreams in a year or two to dig into your major.

Plan Your Way Out of a Jam

Talk to your college advisor about the feasibility of graduating early. Look into concurrent enrollment programs that allow you to take reduced-cost college classes while in high school. AP testing and CLEP tests can also help you receive credit at a reduced rate and speed up your graduation date. Graduating even one semester early can save you thousands of dollars in tuition, housing and other expenses.

Scholarships Are Free Money

In addition to academic and sports scholarships, there are also community-based, gender and subject area scholarships. Once you’re in college, you can work with your major department or honor society to take advantage of these programs. Look into smaller scholarships as well. Sometimes they’re easier to get, and a lot of small scholarships can add up to more money. And don’t forget about grants if you have financial need. Many states and colleges offer their own need-based grant, research and scholarship programs that you can apply for.

Work-study and Summer Jobs

Instead of taking out more student loans, look for opportunities to participate in federal work-study. These are programs that provide you work during the semester and can help you reduce the need for debt. A summer job can build up your resume and help toward paying your college expenses for the coming year.

Get Ahead of Debt

Make sure you fill out the Free Application for Federal Student Aid each year to take advantage of grants, work-study and some scholarships. Speak with a financial professional to help you take steps now to sidestep serious debt and make your transition into life on your own as smooth as possible.

 

How Much Debt Is Too Much?

How Much Debt Is Too Much?

No one plans to take on too much debt. Unfortunately, it can be easy to gradually get in over your head. One month, you fund a beach vacation on your credit card. A few months later, you purchase a laptop. Then, your car transmission goes, and before you know it, you’re in deep. But knowing how much is “too much” for your financial situation may help you avoid digging a hole that might take you years to climb out of.

 

How debt happens. Sometimes debt arises unexpectedly due to emergency spending, a job loss, medical expenses or unanticipated home or car repairs. But excessive debt can also result from impulse purchases or a desire to keep up with the Joneses. It’s nearly impossible to set limits on the former type of debt, but you can control the latter. Also, note that we’re mostly referring to credit card debt as opposed to mortgages, car payments or student loans.

 

Debt’s damage. It costs money to assume and maintain debt. You’ll likely spend a pretty penny to finance your credit card balances through the interest you pay your lender. And when you make only the monthly minimum payments, those charges, along with an occasional late fee, can add up fast. And the damage isn’t necessarily limited to financial impacts. Debt can cause stress, exacerbate marital problems and damage your credit. Ultimately, debt can even derail your retirement plans. When you take on a lot of debt, you’re likely contributing less to your retirement plan, and the money you don’t invest doesn’t have the opportunity to grow over time.

 

Setting limits. Every situation is different, and there are no hard-and-fast rules. But consider the 28/36 rule as a good place to start. This is a guideline many lenders use when evaluating mortgage applications. It stipulates that no more than 28% of gross monthly income should be spent on total housing expenses, and no more than 36% on all debt, including credit cards.

 

Monitoring debt: Once you have a sense of how much debt is too much, the challenge is trying not to cross the line. To do that, you need to monitor your debt situation on a regular basis — because it’s hard to control what you don’t track. Fortunately, numerous online and mobile tools are available to help you do just that. Some examples include Mint, Credit Report Card and Tally. These apps can help you consolidate and organize all of your debt tracking in one place. You can also use a simple spreadsheet to list all your debts according to lender, total balance and interest rate.

 

If you’re concerned about the impact your debt may have on your retirement readiness, talk to your WellCents financial professional to review your financial situation, including your current debt. Together, you can come up with a plan to dig out of debt once and for all.

 

Source:

https://www.investopedia.com/terms/t/twenty-eight-thirty-six-rule.asp

Have a Long-Term goal? Financial Planning can Help You get you there

Have a Long-Term goal? Financial Planning can Help You get you there

After several years of wallowing in financial upheaval caused by a severe recession and financial crisis, Americans are, once again, looking to the future. A renewed confidence has many people setting their sights on long term goals that, just a few years ago, may have seemed out of reach. However, as too many people have painfully learned, simply having a long-term goal, whether it’s an early retirement or a college education for your children, is not enough to realize your ambition.

A financial goal is a life destination which requires a map and a way to get there; and, assuming you have finite resources with which to successfully make the trek, they need to be used wisely or you are likely to come up short. If you have a long-term goal, financial planning can help you get there.

What exactly is Financial Planning

All of us have certain things in life we want to accomplish and many of them require financial resources. These are called financial goals. Living a secure and enjoyable retirement is a goal shared by most people. In addition to that, parents want to be able to provide a college education for their children, buy a bigger house, or expand their business, and while working towards all of those, they want to ensure the financial security of their loved ones. These all become intricately linked pieces of your financial puzzle.

A financial plan is about carefully forging those pieces and fitting them in their proper place so that they work effectively together towards your vision. If a piece is missing or doesn’t fit quite right, it could skew all of the other pieces. As you become financially successful, more pieces are needed to complete the financial puzzle, such as risk management, tax strategies, and estate planning. Because of their impact on the total financial puzzle, it is critical to have a wellconceived, integrated plan.

The financial planning process enables you to focus clearly on your specific goals while addressing all of your concerns so they are no longer obstacles. And, having a well-conceived, comprehensive financial plan enables you to shutout the constant drone of doom and gloom, because, in the long-term, your plan is all that matters.

Steps in the Financial Planning Process

The financial planning process involves four essential steps that, if followed diligently, will increase the likelihood of achieving your long-term goals; however, it does require discipline, patience and adherence to basic financial principles.

Establish Clearly Defined Goals

Very rarely does anything of financial importance happen accidently. In reality, absent a clearly defined, quantifiable goal that’s set along a realistic time horizon, chances are it won’t happen. Your goals need to be both realistic and inspiring enough to motivate you to action. It’s not enough to know what it is you want to achieve; you need to have a deep sense of why it’s important, and how it would make you feel when it’s achieved. To set a realistic goal, envision it, quantify it (what you need to save), and make sure you have the resources to fund it.

Assess Your Current Financial Situation

Financial planning is a continuous process of assessing where you are currently in relation to your goals. This enables you to make the adjustments in your strategies necessary to keep you on track. Your financial picture is comprised of a balance sheet (assets and liabilities) and a cash flow statement (budget and savings). Your objective is to constantly improve your financial picture – reduce debt, increase cash flow/savings, grow your assets - which could enable you to achieve your goal early, or enable you to target additional goals.

Create an Actionable Plan

A financial plan is typically comprised of several strategies, each designed to address a different piece of your financial puzzle. Developing a systematic savings and investment strategy for accumulating the funds needed for your goal is obviously a key part of your financial plan. But, life happens, and your financial plan should also include strategies for dealing with life’s contingencies, such as an accident or illness, or even a premature death in the family that could derail the plan.

Priorities have to be established in order to shore up all aspects of the plan. Before allocating all of your resources towards your financial goal you need to create an emergency fund to cover at least six months of living expenses, and an insurance plan to protect your finances in the case of a disability or death of a family member. Each priority should have an actionable plan to achieve it.

Monitor and Measure Your Plan

The biggest mistake many people make is to create a financial plan and then put it on the shelf. A financial plan is a living, working document that needs to reflect your current circumstances as well as the impact of a changing environment. It becomes a benchmark against which your progress to your goals is measured.

As your personal circumstances change and evolve, your plan needs to be updated, and, very likely, strategies will need to be updated or added (i.e. increases in insurance amounts, a change in your asset allocation, a new tax reduction strategy). The more frequently you assess your situation and measure your progress, the more minor any adjustments to your strategies will be.

Seek Professional Guidance

Although financial planning is not rocket science – there are plenty of resources available to develop your own – it can become more daunting than the average person is able or willing to tolerate. The body of knowledge required to navigate multiple disciplines (i.e., investments, insurance, taxes, retirement planning, estate planning, etc) is beyond the capacity of most people. In addition, most people lack the discipline and patience to strictly adhere to a plan, especially when their emotions get the upper hand.

A competent financial advisor can more efficiently guide you through the process of planning your future, designing your strategies and navigating the complex universe of investments and financial products. Of equal importance, he or she can also be your financial coach, holding you accountable to your plan while coaching you through your emotions and encouraging you to the finish line.

Tags: reduce debt, debt, retirement, long term goals

Securities may be offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment Advisory Services may be offered through NFP Retirement, Inc. Kestra IS is not affiliated with NFP Retirement Inc., a subsidiary of NFP.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.

Average Credit Card Debt by Age

Average Credit Card Debt by Age

A report by Federal Reserve economist Joanna Stavins combined Equifax data with the 2015- 2016 Federal Reserve Bank of Boston’s Survey of Consumer Payment Choice (SCPC) on how consumers pay for purchases. Comparing self-reported measures with objective data, she found that people tend to have fewer credit cards with higher limits than they report. According to her research, it’s estimated that 44% of adults have revolving credit that they don’t pay off in full each month with an average balance of $6600.

The study also included average credit card balances for various age brackets. Debt is becoming an increasingly larger part of the financial planning landscape. And it has different implications at different ages. Here are the average balances for each age group in the study and how carrying debt can impact them at each phase of life.

Age <25:The average credit card debt for this age group is $2340*. You may be a recent graduate with your first real job, earning your own money for the first time in your life — finally paying your own way. But you’re also likely having your first experience trying to balance saving and paying off debt if you graduated with student loans. Having an extra credit card payment can make that juggling act even harder. Or it can delay independent living altogether. Adopting a “cash only” policy for things you want early in life can help stave off larger problems later.

Age 25-34:: With an average balance of $3240 on your credit cards, you might be buying your first home and starting a family. With growing credit card debt, it could push that first home purchase a few years down the road or out of site altogether. When planning to buy a home or start a family, it’s important to look at your overall budget ahead of time. This is a terrific opportunity to sit down with your financial advisor to help set you up for success and make this exciting time in your life as stress free as possible.

Age 35-44:Carrying an average credit card balance of $5480, you’re in your prime earning years and you may be on your second or even third home. There could be an even larger family at this point and temptation to start cashing in on your years of hard work and higher salary. While you certainly deserve to enjoy the fruits of your labor, it’s important not to sacrifice future happiness for today’s pleasures. Maintain and increase your contributions to your 401(k) and other retirement accounts. It’s often easier to bump up contributions after a raise or bonus. It will become increasingly harder to make up for lost time later.

Age 45-54:With life in full swing and an average credit card debt of $6250, you may be facing some additional financial challenges during this phase of life. You might need to fund an expensive college education for one or more kids, pay for a wedding or two — and you might even have to start pitching in to help your parents. It can be easy to lose track of your own financial goals with so much going on. Stay in regular contact with your financial advisor and start making catch-up contributions to your retirement accounts if you need to once you qualify.

Age 55-64:Retirement is starting to loom large in the window and you need to start getting your ducks in a row. Hopefully, you’re carrying a little less debt now, on average $5360 on your credit cards — but it’s no time to become complacent. Have a plan to reduce debt as much as possible before your income stream dries up. Make sure you’re addressing healthcare financial risks by taking care of yourself and consider long-term care insurance if you don’t already have it.

Age >65:Congratulations on your retirement! Or maybe not so fast. Excessive debt can delay or even prevent retirement altogether. The average credit card debt for this age bracket is $3630. If you’re still carrying a balance, try to pay it down as fast as you can. If you’re not employed full-time any longer, consider a little part-time work or some temporary lifestyle adjustments to get the job done faster and enjoy your golden years debt-free.

*To account for people who declined to participate, the researcher made some statistical adjustments to keep study results nationally representative.

source: https://www.bostonfed.org/publications/research-department-working-paper/2018/credit-card-debt-and-consumer-payment-choice.aspx

Tags: reduce debt, debt and retirement, debt, retirement


Page 1 of 5