You're ready to launch into college, springboard into a career and vault into a happy, successful life. There's just one obstacle standing in your way: money. Yes, you've come to terms with the fact that you need a student loan. You may be a little anxious about it, or you may be downright petrified. But with a little planning and know-how, you don't have to fear the student loan. Here's what you can do to prep for your loan and take the anxiety out of the process.
Prepare your budget.
Your adult life will include many components (and costs). Take a sheet of paper and list them all out. What's the average starting salary for your career choice? What car will you be driving? Where do you plan to live? What about other expenses (groceries, shoe-shopping, utilities, etc.)? Average those in also. Now, consider your proposed starting salary minus your costs. Whatever is left over is the amount you can realistically afford to pay monthly for your student loan.
Figure out your interest rate (with a little help).
Terrifying and confusing, nothing quite intimidates like interest. Fortunately, there's a wealth of tools at your disposal, both online and in person, to demystify it. Here's where you can go for help in translating your interest rate into dollars and "sense":
- Financial aid websites: You'll find a host of sources online to help you unravel the mystery of your loan interest. Government-hosted websites, such as direct.ed.gov, offer reference material for a wide variety of student loans and the variance in interest rates you can expect for each.
- Loan interest calculators: Determining your payments for the duration of the loan is a must. At direct.ed.gov, you'll find online loan calculators to help you determine your payments for a wide variety of student loans and repayment plans. Simply plug in your loan amount, your interest rate and a few other relevant figures, and the calculator will determine what you can expect to pay throughout the life of your loan.
- Talk to a professional: There are plenty of flesh-and-blood resources to turn to for help with deciphering your student loan interest rate. Talk to your lender at length. He's there to answer questions and clarify your loan's fine print. Your school financial counselor is another excellent source of loan interest information.
Plan for the end.
You've plugged all the details into your loan calculator. You know how much you'll pay monthly and how many years it will take to pay off the loan. You need to plan for each year. Budget ahead for the expense of a new car and all the other growing pains of life. Student loans require a long-term plan, from beginning to end, in order to safeguard your financial future and avoid long-term debt.
A student loan doesn't have to lead to nasty surprises down the road or a lifetime of debt. Take the time to budget properly, explore your options and plan ahead, and your student loan will be a stress-free stepping stone toward a bright and successful future.
Graduating from college is exhilarating. You're entering the real world, about to make it on your own. But if you're like most grads, the weight of your student loans quickly sets in, and facing this reality can be rather intimidating.
The latest statistics from the Consumer Financial Protection Bureau show that the nation's student loan debt has hit $1 trillion. Sobering numbers like this are making many wonder if the cost of a higher education is really worth it. Although I hold what seems like an endless mound of my own student loan debt, I argue that it very much is.
Yes, it can be highly stressful staring that much debt in the face fresh out of college. 2013 college graduates faced an average of $35,200 in education-related debt, but what's even scarier than facing debt is facing unemployment. Statistics show that the unemployment rate for college graduates is 50 percent lower than it is for people without advanced degrees.
That's not to say that it's necessarily easy for recent grads to find work in their particular field. Experts advise that prospective students carefully examine their chosen field of study and research the job market. Studies that show which fields have the highest likelihood of landing you a job can help you choose your ideal major. For example, the Georgetown University Center on Education and Workforce completed a study showing that elementary school teachers face a much lower unemployment rate than those who graduated with a degree in architecture. Their study provides data on a variety of job fields and their associated unemployment rates and argues that not all college degrees are created equal.
And then there is the issue of salary. We complete these higher degrees in hopes of earning a higher income than we could have without them. According to a study by the Georgetown Public Policy Institute, people who hold a bachelor's degree do indeed earn 45 percent more than those with an associate's degree. And those with master's degrees earn an additional 37 percent more than bachelor's degree holders and hold higher quality jobs, as well.
Higher earnings immediately out of college are a plus, and when you consider how much more you earn over the course of your lifetime, it makes your degree even more valuable. In a report put out by the College Board, they show the need to examine the benefits over the longer term. Over the course of a 40-year career of full-time work, the median earnings of those holding a bachelor's degree are 65 percent higher than those of high-school graduates. Associate-degree holders make 27 percent more, according to the report. Despite the debt, degree holders are likely to come out way ahead in the end.
So while starting your career off in debt may not be the most appealing thought, launching a career that is likely to bring you higher profits for a lifetime sounds pretty good. Be wise about your choices of loans, programs and schools to keep your debt at a manageable level, and when your schooling is complete, make a strong plan for repayment. While student loans can be beneficial by helping you increase your earning potential, they are still debt. Pay them down quickly and begin truly enjoying the higher salary that an education can provide.
When deciding between renting or owning, one thing to consider is the amenities offered by your apartment complex. While they may seem like a nice bonus, they could actually save you hundreds and even thousands per year. Here's how:
Many apartment complexes offer a fitness center. This can range from a simple treadmill and a few weights all the way to including a yoga studio with a full professional quality gym. In my apartment search, I've found that this is one of the most common amenities. I've lived in an apartment community that offered a 24-hour access to the gym. Besides the cost on enrollment fees and gas actually driving to the gym, I was able to save on a pricey gym membership. My husband and I saved $30 a month in two gym memberships.
In some club houses, you'll find free coffee and water. Whether it is a standard coffee pot or a high-quality espresso machine with all the fixings, this could add up to huge savings. If my husband and I grabbed a coffee from this machine instead of heading to Starbuck's every day, those savings would add up. It would even save us the cost of buying filters, coffee to brew at home, and even a coffee pot.
A pool is a great form of both exercise and entertainment. You can save hundreds on a membership to a community pool or maintaining a pool yourself.
This not only provides free internet access, but depending on your computer use, it can save you that cost as well. The cost of upgrading your current computer, paying for anti-virus software, buying a printer, paper, and ink can all be saved with the use of a business center. The business center at my last apartment complex also offered a separate quiet conference --like area that was perfect for those of us who work from home or even those studying for an exam.
I can admit that I didn't think much of the fact that my apartment complex came with an opportunity to use the party room. However, when it came to hosting a holiday party, it saved a few hundred dollars on renting a hall or eating in a restaurant. If you have access to it without having to rent it, it may persuade you to rent a unit with less square footage and therefore costing you less since you can entertain in that room instead of your own unit.
Discounts at local businesses
Just by being a resident of my apartment community, I get discounts at local businesses. Restaurants, bars, retail stores, salons, a movie theatre, and even medical offices all offer a discount. I've gotten everything from 10 percent off a meal, and a few dollars off movie admissions, to buy-one-get-one eye wear. Of course the amount it will save you depends on how much you like to do these things.
Playground, access to trails, and other outdoor activities
A playground is a perfect, free way to entertain kids for hours whether they are yours or a guest's. Tennis courts, basketball courts, places to play volleyball, and so on are just a few of the outdoor recreation activities I've seen. Access to trails for running or hiking are a great way to have free entertainment as well.
Storing a bike in winter months could quickly add up. Having storage on-site is a money saver.
Some apartment communities are now offering a fully furnished apartment for you to use when you have a guest over. This could save you hundreds per month if you were contemplating getting an extra bedroom for when your family or friends come to visit for a night.
Access to a video library could eliminate the cost of a Netflix membership, the cost of renting movies, and could even persuade you to bump down your cable package or eliminate it all together.
I love how my apartment complex offers free events every month for residents. We've had everything from complimentary breakfasts, free wine and cheese tastings, appetizers at restaurants, and pool parties with catering. It's a great way to mingle with fellow residents and best of all--it's free entertainment and food.
When I was young, I often accompanied my father to work on air conditioning units. He specialized in all things HVAC (heating, ventilation, and air conditioning). Sometimes I found that the customers wouldn't pay him. Once I asked why, and he explained that they simply repaid him with goods or services of their own. Never once has anyone in my family paid for a car repair because of deals like this that he has in place. Growing up I enjoyed the spoils of bartering in ways you couldn't imagine. We got baked goods as we pleased, and I ate like a king. When I left home to face the outside world, I took these lessons of bartering with me.
Figure out what you got.
Before you begin, you should understand what skill you have to barter. One of the most marketable skills in a barter economy is mechanical skills. Think about whatever capabilities you have and make a list. Make sure people need it. The skills I usually try to barter include content writing for websites, article and essay editing, English language tutoring, Mandarin to English translation, and HVAC work that I do with my father (I'm not yet skilled enough to do it myself). Once you know what you have to offer, you can use these skills to pay for things when you need them.
Know your worth.
Place a dollar value on what you're bartering. Research the value of a good or service you plan to exchange. It's important to take into account your experience and knowledge. I do translation for an auto parts company where my friend works. Once I needed new tires for my car. When the factory sent me a new document from China to translate, I calculated the value of my work and deemed it to be roughly the value of three new tires. When I asked for a full set of four tires instead of a check, the manager agreed. It probably saved us both money.
Understand that what you can barter is endless.
Cash may still run the economy, but anything can be bartered. And it's coming back in a big way because it can be mutually beneficial at times when people and businesses are financially strapped. I know two friends that live together. One works at an airline and the other at a finance company. The one that works at an airline uses buddy passes to pay for part of his rent. It's a win-win for both. My father recently fixed the heating unit in a restaurant. The boss paid him in gift certificates to the restaurant that roughly tripled the dollar amount he should have received. Even things that don't cost much can be bartered. Be creative and think outside the box. Who knows? Maybe you'll be trading dog grooms for oil changes. The possibilities are endless.
Friends, neighbors, classmates, family, and strangers are all possible partners. I personally like to keep my exchanges to friends and family but have used online marketplaces to trade various goods and services. One of my favorite swaps to do online is language exchange. That's one of the ways I learned Chinese and is currently how I am learning Vietnamese. Think about what you need and where you can find it. If you can find it within your local social network, go with that. If you can't, the wild and large world of the internet awaits. Dive in!
A word about online bartering.
Currently, several legitimate bartering places exist online. Obviously Craigslist is one of these, but one I really like is U-Exchange, a site where you can exchange services with other local people. BarterQuest.com and Swap.com are two I enjoy using if I need a particular good and want to pay with something I don't need anymore. Recently, I was able to get Microsoft Office Software in exchange for an old marketing textbook on Barter Quest. A good way to know you have a solid deal on these sites is to look at pictures of the products being offered and talk with the person offering them first. See what other people on the site are saying about that member and spend some time looking at that person's profile. Also, ask questions to verify that a particular person can actually offer the goods or services being promoted. If possible, sign a bartering contract as well.
A payday loan is marketed as an advance on your paycheck -- it's a short-term loan (around two weeks) that typically ranges from $50 to $500, plus a fee.
I know what you're thinking…that doesn't seem so bad. So, what's to fear? I worked for a payday lender right after I graduated college. Sure, many people were able to get a loan, pay it off right away, and be on their way. Unfortunately, I witnessed many others who experienced the negative effects of payday loans.
- They Have Incredibly High Rates
If you're anything like me, the phrase "interest rate" doesn't really sink in until you see how much you're paying. So let's say you take out a payday loan for $100, with a $15 fee. It may seem like a small amount, but that is roughly equivalent to an Annual Percentage Rate of 391%! According to a 2012 Pew Charitable Trust survey, Payday Lending in America, the average payday loan borrower spends $520 a year on interest.
- It Can Be a Vicious Cycle
I rarely saw new faces when I worked for a payday lender. Payday loans are marketed for short-term use only, but an estimated 69% of borrowers use them for recurring bills, like utilities or rent.
Payday lenders make money by getting you to come back. As an employee, I was trained to actively encourage "rollovers," where you pay back your loan and immediately get another one. In fact, the average payday borrower has a loan out for five months out of the year -- so much for a quick fix!
- Lenders Have Access to Your Accounts
By taking out a payday loan, you give out your checking account information and the permission for the lender to take out the loan and fee amount. I can't stress enough how important it is that you truly can pay it back right away.
Payday lenders will deposit your check every payday in an attempt to hurry and get the funds. So imagine already dealing with the stress of money issues, only to wake up and check your account to find the payday lender beat you to your paycheck that was direct deposited.
- They Can Negatively Affect Your Credit
In my experience, payday employees are trained to aggressively attempt to collect. In fact, I have witnessed employees stopping by past due borrowers' homes or places of employment in an attempt to make contact. And they are often quick to charge off the debt and report you to credit agencies rather than working with you at all.
Payday loans don't solve your financial problems. Act in good faith and reach out to your creditors at the first sign of financial difficulty. Once you're on your feet, set aside small sums of money (like the amount of payday loan fee) into savings so you'll have a buffer. If you absolutely need a loan, a not-for-profit credit union is generally your best bet.
When I first left my parents' home roughly six years ago, I truly became aware of the cost of groceries. Possibly because I am tighter than a coat of paint when it comes to certain things, but a few pricey grocery shopping experiences shortly after moving out made me change my food buying ways. After all, I had to make rent. And I had to pay for college.
Rice is a Good Friend to Have
A little rice goes a long way. Or at least that's what I say. Even at $15 to $25 for a huge fourteen pound bag, rice is a substantially cheap way to feed yourself. Through cooking research and by diving into various cuisines, egg fried rice, meats and veggies over rice, and Mexican burritos are now a big component of my home meals. When I'm on the go, hot sauce and rice makes a fine snack to hold me over. Rice gets you full while giving you nutrition. I never used to eat it. Now I see it as an economical option that is both healthy and tasty.
Stay Away from Convenience Stores
Why? Because they aren't so convenient on your wallet. After moving out of my parents' home, I was hungry for cereal my second night in my new apartment, so I drove to a local convenience store to pick up milk and some kind of cereal. "That will be $9.19," the cashier told me. Those words hit me like bird poop splattering on your car windshield. That was more than I made in an hour.
Keep It Fresh and Do the Cooking Yourself
I used to make the mistake of using coupons to purchase things like pre-packaged green beans. Don't do this. I later found that loose and fresh green beans are cheaper by well over one dollar a pound. Coupons are rarely for fresh fruits and vegetables, which are less money than frozen packaged items. Even those quick microvable meals are not as cheap as making something similar yourself. Cut up your own veggies and cook your meals rather than purchasing premade stuff. It will save your body and your wallet.
Only Buy What You Absolutely Need in Bulk
I remember buying about six loaves of bread at the great price of 88 cents a loaf. Never will I do that again. I simply let the façade of big savings get in the way of my actual bread eating capabilities. By the time I ate halfway through that batch, which took about two weeks, the bread had developed a mold and stench bad enough to drive the mice out of my house. I ended up wasting three of the loaves. While the benefit of driving mice away with moldy bread may tempt, it's probably best to only get items you absolutely need in bulk. I tend to keep it to rice, meats--because you can freeze those--and vegetable oil.
Your shopping mentality can save you money. I abide to my list as if I would get a hand chopped off for disobeying it. And you should too. Don't get sidetracked by seductive bags of chips you didn't even come to the store to get. Get in. Get what you came to get. And get out.
Track spending to the dime, browse your investment portfolio and save for that trip to Europe, all while standing in line at the post office. Hundreds of finance apps on the market today turn your smartphone into a powerful financial tool, ideal for seizing control of your bottom line. Here's a sampling of some apps you'll love.
- The all around app. Intuit's Mint Personal Finance (free on Android, iOS) is a full-featured, powerhouse of an app. The app uses 128-bit encryption to link bank accounts and investment portfolios, making tracking, spending, saving and budgeting seamless, fast and safe.
- The app for saving. According to SavedPlus (free on Android, iOS) stats, customers who use their app save an average of $350 per month. The idea is simple: SavedPlus siphons off a small percentage of every purchase, depositing it into a savings or retirement account. Users can set individual savings goals and watch those dollars add up every time they swipe their card.
- The visual app. Budgeting is not usually entertaining; but Toshl Finance (free on Android, iOS) does its best to make it so. The software offers fun spending visualizations, helpful reminders and powerful budgeting tools.
- The family friendly app. For families that operate on a single budget, HomeBudget ($5.99 on Android, $4.99 on iOS) is a great option. The app has a robust budgeting tool with category customization and expense tracking. And best of all, it allows multiple family members to input data from different devices in real time.
- The app for the business traveler. For anyone facing the prospect of a post-travel expense report, Expensify (free on Andriod, iOS) is a must-have. The app effortlessly tracks receipts, and time and mileage while outputting. As the app's creators put it --Expensify creates "expense reports that don't suck."
- The cash flow meter. Level Money (free on iOS) automatically connects to users' bank accounts to track expenses and income. Users get an up-to-date picture of what they can spend on any given day, week, or month based on their savings goals.
- The financial prognosticator. Any app can tell users what they have in their accounts right now. DollarBird ($1.99 on iOS) goes that extra step and uses spending history to predict what users will have in their account tomorrow, next week and next month.
- The interface app. CoinKeeper ($5.99 on iOS, free on Android) boasts the fastest transaction interface on the market. An innovative drag-and-drop system helps users track spending and monitor their budgets without cumbersome inputting.
- The full-featured. MoneyWiz ($4.99 for iOS) is definitely among the most robust finance tools out there with 300-plus features and syncing across all (Apple) platforms. The desktop version will set you back another $24.99. But for those that need something more powerful, this is a great option. Android and Windows versions are coming soon.
- The app for bill paying. Late bills wreak havoc on a credit score. Don't miss a payment ever again with Manilla (free on Android, iOS). The app consolidates household expenses, stores bills and statements, and offers custom alerts to keep users on top of their spending.
Just completed a job on the side, got paid for it, and liked it? Congratulations! You are now a freelancer.
Want to do it again? Even better news -- freelancing is a viable and trending way to regularly supplement your current income, fill in gaps between jobs, or make a living full-time.
Working for yourself can be liberating, but take it from someone who's been and happily stays there, navigating your way around can be tricky. Make your experience a positive one by:
- Testing the waters. Personal satisfaction is great, but we all have bills to pay and responsibilities to uphold. If you're considering freelancing, start picking up jobs on the side before you quit your day job. There's a solid chance you may find that something you love simply isn't as much fun when it becomes your work. You could discover that you aren't willing to give up the expensive habits that your current job supports, or that you need to bulk up your savings account before you make a big change. You might learn that you need more time to develop the discipline required to freelance successfully. If you dip your toe in the waters, these are simply lessons you learn and file away; if you dive in, these can become the things that sink you.
- Analyzing the cost of living in your area. "Freelance" is not always synonymous with telecommuting, but the term is generally applied to workers who do their thing off-site. If you are seriously considering making freelance work all or a substantial part of your income, start paying close attention to the cost of living in your area. If you live on the east or west coasts, or in a major city, you may need to move to make freelancing a viable way to earn a living. Remember, now you can work from anywhere.
- Getting smart on tax implications. When you are the boss, you are also the record keeper and chief accountant. If you earn more than $600 from a single source, or $400 from self-employment, the IRS wants to know about it. Freelancers are also responsible for their own social security, medicare, and other costs typically covered by an employer. Becoming an LLC or filing for "doing business as" can enhance your credibility, but carries its own tax implications. Consult a tax expert to discuss the best way to transition to a freelance career, and what records you need to keep to stay out of the audit crosshairs. My advice? Keep everything, then make copies.
Finally, remember that elephants are eaten one bite at a time. Freelancing is hard. The market is increasingly competitive, the hours are long, and the work is erratic, especially in the beginning. Build up your savings, take a deep breath, and do a happy dance for each and every client you earn. Work fast, provide a good product, cultivate a respectful demeanor, and the jobs will come. You are your own boss now, and that takes a lot of faith.
For decades, the only type of mutual fund that you could buy was a traditional, open-end fund that offered shares directly to you. But many investors have become increasingly frustrated with these over time because of their relatively high expenses, illiquidity and inability to beat the markets over time. Fortunately, a new breed of mutual fund appeared in the late 1980s that offers greater liquidity, lower costs and superior performance. Exchange-Traded Funds (ETFs) represent the next generation of mutual funds, and they can provide you with a more efficient return on your money once you learn what they are and how to use them.
Like traditional mutual funds, ETFs offer diversification and professional selection of securities or asset classes, such as stocks, bonds, real estate, commodities and precious metals. Many ETFs represent a foreign securities exchange. There are also ETFs that allow you to leverage the markets in either direction; that is, they will increase or decrease in value (possibly by several hundred percent) when the markets rise or fall.
Regardless of what they invest in, the tax rules for ETFs are much more straightforward than for their traditional counterparts. Mutual funds are often taxed when they are sold and are taxed based on their accumulated capital gains, which were generated in the fund and given to investors each year. But ETFs do not accumulate gains and losses within the fund in this manner, and investors will simply calculate gains and losses based upon their purchase and sale prices, making them much more tax efficient. ETFs are also much cheaper to buy and sell than traditional funds, which can assess hefty sales charges for purchases or redemptions.
Investing in ETFs
Getting started with ETFs is easy. First, you need to figure out what your investment objectives are. Are you looking for long-term growth, income or some combination of the two? Then you need to search for ETFs that fit your objective. There is at least one ETF available for every investment objective under the sun, so keep looking until you find exactly what you are searching for. Then you will need to open a brokerage account either online or with an investment firm in order to purchase them. ETFs are excellent investments if you want to time the markets because of their low transaction costs. But if you want your ETFs for the long term, then you may be faced with the temptation to sell them whenever they decline in price, which can disrupt your investment strategy and cause you to miss out when the market rebounds.
ETFs provide liquidity, transparency and diversification in a single tax-efficient vehicle with minimal expenses and low transaction costs. For more information on these unique instruments, consult your financial advisor.