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Stop the Trend Spending

November 28, 2018

From hoverboards and iPods to boy bands, trends will come, and they will undoubtedly go. Anyone who has experienced and come through the other side of a trend can look back and laugh, but we aren’t sure about their wallets. At Education Loan Finance, we refer to spending on the latest “it” items as “trend spending”. Always following the latest trends can wreak havoc on your personal finances.  We are not saying don’t do anything trendy and live under a rock. What we are saying is that rewarding yourself for making good decisions is important, but evaluate that choice carefully. Let’s take a look at the latest trend spending taking place, how much money is actually being spent and how it could add up over time.

 

Vaping

We’ve all been there, walking or driving along when you see the occasional cloud of vape on the sidewalk. If you’re lucky, that cloud of vape isn’t directly in front of you while you’re walking and you’re able to dodge that second-hand vape cloud. In addition to the envied clouds vaping creates, the flavors can range from cereal flavors to candy flavors.  Just like the flavors, the mods come in a variety of sizes too, from huge mod kits that make tons of vapor to tiny USB chargeable vapes like the JUUL®.

 

Vaping has become one of the biggest trends in the U.S. The more vapor you can produce the “cooler” you are according to the vaping community. According to a CDC report released in October 2018, JUUL Labs® account for nearly one in three e-cigarette sales, nationally. While vaping might be the latest trend, remember that its long-term health effects are still unknown. Couple the possible health effects with the cost and you might just convince yourself to stop.

 

JUUL® Starter Kit – $45

Four pack of pods $16.

Let’s assume those are purchased twice a month, so that is 24 x $16 = $384

Total Cost of Vaping for a Year= $429 

 

Assuming that you bought a JUUL® unit to do your vaping and you bought a new pack of pods every two weeks or twice a month, you’d be spending $429.00 a year. Over the course of four years, that’s about $2,000! We didn’t even include any sales tax in this equation, but many states are rolling out taxes on vaping products.

 

Subscriptions

Subscriptions used to be associated with Highlights® magazine or catalogs your Grandma would receive in the mail, but the 21st century has revitalized the subscription. Now, subscriptions can get us movies, vitamins, clothes, music, even dating sites and all are currently available at our fingertips. The subscription box industry, in particular, is experiencing rapid growth. Since 2014, the subscription box industry has increased by 890% according to a 2018 report by Hitwise. Subscriptions, though convenient, can really end up costing you in the long run.

 

The danger is that once your card is on file, it’s so easy to forget about the service. Here’s a list of the most popular monthly subscription services of 2018. Let’s say, you signed up for the FabFitFun® subscription box for a year. Now, this box is sent only four times a year based on the season. The box comes with full-sized premium products. In addition to the box you receive, you get access to the FabFitFunTV which shares workouts, access to exclusive member sales, and you have access to the entire community online.  Now, that box is $50.00 per season or $200 a year.

 

Fancy “Dranks”

It’s hard for a month to pass without seeing some crazy coffee creation from your local Starbucks®. Recently, the Witch’s Brew Frappuccino outshined the previous favorite, Unicorn Frappuccino and became an Instagram® trend.  Drink trends can really spiral out of control and quickly. If you actively participate in social media by checking your Instagram® or Facebook® every once in a while, you can’t help but notice them. In some weird way, all these Frappuccino drinks and IPAs flooding your news feed put pressure on you to join in and go purchase one of these beverages.

 

This pressure to join in on the cool coffee trend can come down on your wallet like a hammer. The average cost for a latte at Starbucks® as of 2018 was $5.75 for a Grande, and that doesn’t include any fancy cake pops! If you bought yourself a latte, once a week for a year, what are you really spending?

52 weeks a year x 5.75 = $299.00 a Year! You’re paying about $300 on lattes a year. Think of how far that money could go towards your student loan debt.

 

Health Food

The latest trend in the food and beverage industry is likely to come from your favorite online health influencer. It’s also likely that drink ends in a vowel like Kombucha, Matcha, or bubble tea. These drinks have been around for decades, but lately, they are skyrocketing due to a new health movement. Kombucha and other fermented drink sales were up 35.6% in 2017 according to FoodNavigator-USA. This fancy probiotic drink can really end up costing you at $3.75 per bottle. If you’re looking to drink it once a day, it adds up to $1,368 a year in total cost on Kombucha. We aren’t saying to deprive yourself of the latest health trends, but we’re suggesting to think wisely before deciding to purchase it. Really understand how that small amount of money can add up to a lump sum that can easily be applied to debts. Maybe even try making your own Kombucha, there are tons of websites and directions available online.

 

Bubble Tea or as some may know it as pearl milk tea, boba juice, or just boba, has been in the US for years, but it’s recently gaining major trend status in 2018. There have been multiple chains arising that specialize in Bubble Tea. You may know these chains as Kung Fu Tea® or Boba Guys®.  Bubble Tea could make a great date or even a trendy place to stop with friends. It offers a nice alternative to the usual coffee or beer we’ve all grown accustomed to. We wouldn’t recommend making Bubble Tea a daily habit or even a weekly habit because like Kombucha the small amount spent could really end up adding up.  The average cost for a Bubble Tea is $3.50, and if you choose to go every day for a year, it equates to about $1,277. That is some serious money that can be used to get out of debt or start investing in retirement fund money.

 

Quick Food

Food is important because it keeps us alive, but that doesn’t mean we need to spend all of our income on it. Simple changes to your everyday life like packing lunch for work could really help you save in the long run. Eating out can be expensive, time-consuming, and even dissatisfying. Before you pick up your cell and place an online order, let’s take a look at these stats. According to the 2017 Bureau of Labor Statistics’ Consumer Expenditure Survey, Millennials ages 26-34, spent $3,416 annually on food away from home.

 

Imagine for lunch every day at work you bought a burrito from Chipotle®. Just a burrito is about $8.00. Now, our cost has no fancy drinks because we learned our lesson on trend spending on sparkling water when the office has free and classic H2O available. We’ll assume that you work five days a week and it’s typically Monday through Friday. We aren’t going to account for vacations or days off in our math. Let’s see what your yearly cost for lunch is…

 

$8 Burrito Cost x 5 days in a work week = $40 a week spent

$40 x 52 work weeks per Year = $2,080 spent a year

 

Though it’s so easy to get sucked into the trend of going out to lunch and grabbing something easy, please be cautious. Apps like UberEats®, GrubHub®, and Seamless® may seem convenient, but they can cause unnecessary costs.  Try to cut back on eating out or ordering in food. We know, easier said than done. Especially, when it comes to working all day and having to make yourself dinner when you get home.  Add to it cleaning up any dishes you may have used, and it just gets overwhelming. This doesn’t have to be an all or nothing situation though, try packing your own lunch weekly. If that seems like a lot maybe only purchase lunch on Fridays. These small life changes could have an impact on your finances, and they are just creating good spending habits as you move further on into adulthood. Just remember that the amount of money spent on food could pay off student loans, or be added to the down payment on a house.

 

Give & Take

Whether you are trying to get out of debt or save up money to achieve a financial goal, there is always a little give and take. You deserve to enjoy yourself and treat yourself every once in a while with the latest trend, but don’t get so caught up in the trend spend™ craze that you lose any sense of the amount you’re spending.  Trends may be great – I mean, after all, they did become a trend, but you need to stay focused. If you are finding it difficult to stay focused on your financial goal, try making a compromise of the situation. It will always help to remind you that it’s just that, a trend. Trends will come, and they will go, but your finances will be with you forever. Be the financially responsible you that we know you can be!

 

Avoid These 7 Money Mistakes

 

 

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Young woman holding keys to first home
2020-07-13
Top Finance Tips for First-Time Homebuyers

Buying a new house can be a daunting experience. From getting prequalified, finding the right house, being approved, to coming up with the necessary funds, the whole experience can feel a bit overwhelming. Have no fear – here are ELFI’s top tips for first-time homebuyers to overcome the challenge.

 

Make a Budget

Deciding on a budget before you start shopping will help you choose a home you love that falls within your price range. In building a budget, be sure to consider your total income, as well as necessary expenses like utilities, food, and gas you’ll incur each month in addition to housing costs. As a rule of thumb, you should aim to keep the cost of your mortgage below 25% of your take-home pay.

 

Maintaining a budget is a great way to continue to meet other financial goals, like paying down student loans, saving for a car, or building an emergency fund, while searching for your dream home. If you’re not sure where to start, SouthEast Bank’s fixed and adjustable-rate mortgage calculators can help you determine your initial budget and launch a successful house hunt!

 

Here’s an extra tip. Don’t forget to include closing costs in your final total! Many first-time homebuyers make this mistake and find themselves over-budget at the end of the transaction. Average closing costs fall between 2-5% of the total cost of the home. In some situations, the seller may agree to cover the closing costs, so be sure to consider including that in your home offer as well.

 

Boost Your Credit Score

When you’re considering buying a home, give yourself every advantage by keeping your credit score in great shape. If your credit could use a little extra help, try these tips to polish your score:

  • Make bill payments on time. Late payments are a credit score’s worst enemy, as payment history is the most heavily weighted category in determining your score. Set reminders in your phone, leave yourself sticky notes, and do whatever it takes to get those payments submitted by their deadlines!
  • Slow down the spending. Hitting your credit limit can also damage your score, so be careful to use different forms of payment, like cash or debit, or cut down on unnecessary spending.
  • Don’t close that card. Closing lines of credit can be damaging to your score, even if they’re linked to cards you rarely or never use. Instead, put your card in a safe place and use it for occasional transactions, or set it up on autopay for a small monthly expense. If you do need to cancel the card, take these steps from U.S. News to avoid significantly dropping your credit score.

If you found this advice helpful and you’d like to take a deeper dive into your credit score, check out ELFI’s blog, “How to Build Credit: A Beginner’s Guide.”

 

Understand Your Mortgage

Buying a house is a big decision, but understanding your mortgage will give you the confidence to take the next steps in finding your perfect home! Here are a few ways to determine which mortgage loan is right for you:

  • Choose a mortgage term that fits your budget. Mortgages generally have terms of 15, 20, or 30 years, meaning the length of time it takes to repay them.
    • If your goal is to keep your monthly payment low, then opt for a longer-term loan, which will allow you to make smaller payments over time. While long-term loans are great for lowering your monthly payment, however, they increase the number of total payments and result in more interest than short-term mortgages.
    • On the reverse side, short-term mortgages have higher monthly payments but less total interest. Either way, the important decision is choosing the term that allows you to remain within your budget and keep your financial goals on track!
  • Find the right mortgage lender. All too often, first-time homebuyers make the mistake of stopping their mortgage search after being approved by one lender. Instead, take the time to reach out to multiple lenders and determine who can offer the best rate. By being selective, you could save thousands of dollars over the life of your loan.
  • Get preapproved by your top lenders. After you’ve decided which lenders you’re most interested in working with, show sellers you’re serious by getting preapproved for a loan. A preapproval letter shows that a lender has researched your credit and financial history and determined they’d be willing to offer you a mortgage loan.
 

Choose the Right Insurance

Once you’ve built your budget, boosted your score, and finished your mortgage research, it’s time to close on your dream home!

 

As part of the closing process, you’ll be required to purchase homeowners insurance. Like mortgage lenders, several companies offer homeowners insurance with different rates and benefits. Take the time to research which insurance plan is right for you to ensure you’re receiving the best protection.

 

If you could use some expert help, reach out to SouthEast Insurance Services1. Their experienced representatives can compare rates from more than 40 major lenders to be sure you’re getting the most for your money. Visit them here to learn more to receive a complimentary, no-obligation quote.

 

Congratulations! You’ve done your research and found a dream home within your budget. With our first-time house hunter tips, you’ve also built your credit and received competitive rates on your mortgage and insurance. Now, it’s time to enjoy the home you’ve worked so hard for.

 

At ELFI, we’re proud to support your financial goals and are here to help you along every step of the way. Check back soon for new blog posts, and happy house hunting!

 
 

Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.

 

1SouthEast Insurance Services Products

  • are not a deposit
  • are not FDIC-insured
  • are not insured by any federal government agency
  • are not guaranteed by the bank
  • may go down in value
 

Insurance products are not insured by FDIC or any Federal Government Agency; are not a deposit of, or guaranteed by the Bank or any Bank Affiliate; and may lose value. Any insurance required as a condition of the extension of credit by SouthEast Bank need not be purchased from our Agency but may, without affecting the approval of the application for an extension of credit, be purchased from an agent or insurance company of the customer's choice.

2020-07-13
How to Save for Retirement While Making Student Loan Payments

If you have student loans, you know how your debt can affect your ability to pursue your other financial goals, especially saving for retirement.    According to a recent survey by TIAA, 84% of responding adults said that their student loans negatively impacted the amount they were able to save for retirement. For those who aren’t saving for retirement at all, 26% said their student loan balances were why they couldn’t afford to do so.    However, putting off saving for your retirement is a costly mistake. It’s important to balance saving for your future with paying down student loan debt now. If you’re struggling to manage both priorities, here’s how to save for retirement while keeping up with your loan payments.  

Why you need to save for retirement now

When it comes to saving for retirement, the earlier you begin saving, the better. Compound interest and the power of annual returns can help your money grow over time. The longer you wait to start saving for retirement, the more you’ll have to invest your own money to have enough saved to retire comfortably.   For example, let’s say Jen begins saving for retirement at the age of 25. She contributes $250 per month into her retirement account, and her average annual return is 9%. By the time Jen reaches the age of 67, she’s contributed just $126,000 into the account, but her retirement account is worth $1,406,746.   By contrast, Jen’s friend Stephanie puts off saving for retirement until she pays off her student loans and doesn’t start contributing to her retirement until she’s 35. She starts putting $500 per month toward her retirement fund — double what Jen contributes each month. Like Jen, Stephanie earns an average annual return of 9%, but by the age of 67, her retirement fund is worth only $1,108,257. Stephanie contributed $192,000 of her own money — nearly $70,000 more than Jen — but her retirement account is worth approximately $300,000 less than Jen’s because Stephanie got a later start.   Chart showing the impact of saving for retirement earlier  

Retirement savings options

If you’re not sure how to save for retirement, here are some popular retirement plans.   

401(k) 

A 401(k) plan is an employer-sponsored retirement plan, meaning it’s a benefit offered through your job. With a 401(k), you invest a portion of your pre-tax salary in the investments you choose. Your contributions and the earnings are not taxed until you withdraw from the account.  

401(3)b 

401(3)b plans are very similar to 401(k) plans, but they’re offered to employees of non-profit organizations, churches, public schools, and universities. You make contributions to your retirement plan on a pre-tax basis, and your contributions and earnings aren’t taxed until you make withdrawals.  

IRAs

Another great option is to open an Individual Retirement Account (IRA) on your own. There are two options: a Traditional IRA and a Roth IRA.  

Traditional IRA

Anyone can contribute to a Traditional IRA, regardless of income. With an IRA, your earnings can grow tax-deferred, meaning you only pay taxes on your gains when you make withdrawals in retirement. Your contributions may be tax-deductible depending on your income level and if you have access to an employer-sponsored plan.  

Roth IRA

If you meet the income restrictions, a Roth IRA may be a useful option. With a Roth IRA, you make contributions with after-tax dollars. Why is that a good thing? While your contributions aren’t tax-deductible, your earnings and withdrawals are tax-free. And, you can take out the money you contribute to your Roth IRA — but not your earnings — before you reach retirement age without paying any penalties, so your Roth IRA can double as an emergency fund in a pinch.  

How to save for retirement while paying student loans

Finding a balance between saving for retirement and paying down student loan debt can be tricky, but it can be done if you follow these three steps:  

1. Make the minimum payments on all of your student loans

It’s important to stay current on all of your debt to maintain and protect your credit score and prevent racking up costly late fees. Keep making all of the required minimum payments on your federal and private student loans to avoid falling behind and entering student loan default.*  

2. If your employer offers matching contributions, contribute enough to earn the full match

If you have access to an employer-sponsored retirement plan like a 401(k) or 403(b) and your employer offers matching contributions, contribute enough to your account to qualify for the full match. Otherwise, you’ll lose out on free money that is a key part of your compensation package. Over time, skipping the match could cost you thousands of dollars.   For example, let’s say you make $40,000 per year, and your employer will match 100% of your contributions, up to 5% of your salary. That means if you contribute $2,000 per year to your retirement plan — 5% of your salary — your employer will match your contribution, giving you an additional $2,000 per year toward your retirement fund.   If you didn’t take advantage of the match while you were with that employer for five years, you’d miss out on $10,000. But the long-term consequences are even worse. If that money earned an average 9% annual return, in 30 years, that $10,000 would be worth over $147,000. That’s why it’s so important to take advantage of employer matching contributions if they’re available to you.   If your employer doesn’t offer a match, or if you don’t have access to an employer-sponsored plan, contribute to a Traditional IRA or Roth IRA  instead.  

3. Tackle your high-interest student loan debt

If you have extra money left over each month, put it toward high-interest student loan debt, meaning loans with an interest rate of over 5%. You can also consider student loan refinancing to lower your interest rate and reduce your monthly payment.   By refinancing your student loans, you can save money and free up more money in your monthly budget to save for retirement. Use the student loan refinance calculator to see how much you can save.*  

The bottom line 

When it comes to saving for retirement while paying student loans, you should develop a balanced strategy. Aim to both save for retirement and pay down your student loans at the same time. By taking advantage of employer contributions and tackling high-interest debt, you can improve your finances and build a secure future.  
  *Subject to credit approval. Terms and conditions apply.    Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.
tax documents
2020-07-06
How Can I Get the Most Out of My Tax Return?

If you haven’t already filed your 2019 taxes, you don’t have much more time. The deadline to file your federal taxes this year has been extended to July 15, 2020, due to the COVID-19 pandemic. So if you still need to file this year, or if you’re looking for ways to maximize your tax return for the future, here are some important things to keep in mind.   By Kat Tretina  

Tax Implications of Student Loans 

If you have student loans that you have been making payments on, there is a major benefit you may be able to take advantage of.  

Student Loan Interest Deduction

Each year you pay back your student loans, you may be eligible to deduct up to $2,500 in interest costs off your taxable income. Here are the important things to know about the deduction:
  • The deduction is only for the interest portion of your loan payment. Your monthly loan payment consists of paying back the principal of the loan and interest, so you will not be able to deduct your entire loan payment. 
  • You can take advantage of the deduction whether you have private student loans or federal student loans. 
  • You do not need to itemize your tax return to take advantage of this deduction. This can be taken in conjunction with the standard deduction on your return. This deduction will lower your income, thereby lowering your tax liability. 
  • You have to meet income requirements. You are eligible for the deduction if your Modified Adjusted Gross Income (MAGI) was below $70,000 ($140,000 for married couples filing jointly) the previous tax year. You may be eligible to deduct a reduced amount if your income is higher, however, the deduction does not apply once your MAGI is over $85,000 or $170,000 for joint filers. 
  • You cannot claim this deduction if someone else claims you as a dependent on their tax return. 
  • The loan must have been taken out for a qualified education expense for you, your spouse, or a person who was a dependent when you borrowed the loan. 
 

How The Tax Deduction Works

A deduction is taken to reduce your income that taxes are assessed on, unlike a credit that reduces your taxes owed. For a simple example of how this works, if your income is $50,000 and you paid $1,000 in student loan interest, you can deduct the full $1,000 and your income would be reduced to $49,000 and taxes would be assessed on that amount. Whereas if you claimed any credits, discussed below, the amount of the credit would be taken off of your taxes owed. If you owe $1,500 in taxes and the credit is $500 you now owe $1,000 in taxes.     It’s important to obtain the tax information from your loan servicer when you are ready to file your return. If you have paid more than $600 in interest, your servicer will most likely automatically provide you the 1098-E form. The form will show the total amount of interest you have paid for the year.     If seeing the amount of interest you have paid gives you a shock, you may want to look into refinancing your student loans. Refinancing is when you obtain a new loan to pay off current student loans and can be a simple process that results in savings. Refinancing may help you obtain a lower interest rate, thereby saving you in interest costs. It can also help you lower your monthly payment. Use our Student Loan Refinance Calculator to see how much you may be able to save.*      

Other Ways to Maximize Your Return

If you are looking for other ways to get the most out of your return, check to see if any of these could apply to you:  

Education Tax Credits 

If you are still in school paying for tuition, you may be eligible to take a tax credit, even if you used student loans to pay the expenses. Here are the two available for 2019 taxes.  

American Opportunity Tax Credit

This allows you to take a credit of up to $2,500 per year for four tax years. You must be enrolled in school at least half time and be working towards a degree. Parents who are paying for the college tuition of their dependents can take this credit or the student themselves can take the credit. Make sure to obtain Form 1098-T from the school to show how much tuition has been paid. This credit is not available for graduate students. In addition, there are income requirements to meet.    

Lifetime Learning Credit

If you are working towards a college degree or enrolled in courses to help with your career, you may be eligible to take a credit of up to $2,000 per tax year for tuition, fees, books, and supplies. There is no limit on how many years this credit can be taken. There are income requirements to meet for this credit as well.    

Save More and Reduce Taxes

If you have an IRA or a Health Savings Account and you did not contribute the maximum amount allowed for the year, the deadline is extended to allow contributions until July 15. The money saved in an IRA and HSA is not subject to federal income taxes. So you are able to save more in these accounts and avoid federal income taxes on your savings.      Hopefully, you can take advantage of some of these savings to get the most out of your tax return. As with any tax advice, make sure to use a reputable program or speak with an experienced tax preparer for your specific situation. The most important thing to remember is to file and pay your federal income taxes by the deadline, July 15, 2020.   
  *Subject to credit approval. Terms and conditions apply.   Notice About Third Party Websites: Education Loan Finance by SouthEast Bank is not responsible for and has no control over the subject matter, content, information, or graphics of the websites that have links here. The portal and news features are being provided by an outside source – the bank is not responsible for the content. Please contact us with any concerns or comments.