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Don’t Wait for Graduation to Pay Down Student Loan Debt

What does a currently enrolled graduate student, a recent graduate, or a Doctorate student all have in common? The answer is simple, student loans. Sounds like a bad joke, but student debt in the United States is no joking matter. The current student loan debt total has hit $1.5 trillion as of 2018 according to Federal Reserve data. If you find yourself a borrower of student loan debt, know that debt doesn’t just start after graduation. The moment your loan is approved you become a borrower and therefore take on the responsibility to pay down that debt. As a borrower, here are some ways to be financially responsible and pay down debt quickly ensuring yourself a brighter financial future.

 

Don’t Go Overboard

 

According to CollegeBoard the average full-time bachelor degree seeking student, who attends a four year school will pay somewhere in the range of $21,370 to $48,510 per year in 2018 – 2019.  Now the average Master’s seeking student will pay about $19,080. These estimates do include the cost of room and board and will differ depending on if the student is attending an out of state school or an in-state school.

 

When the time comes to apply for your loans, be sure you have a budget! We cannot stress this point enough you need a financial plan before you make the decision to apply for student loans. Know what you’ll need to borrow money for. Think about tuition costs, housing, meals, book costs, personal costs, and transportation costs. Only borrow what you absolutely need for school.

 

The Countdown

 

Don’t be the student who has the countdown until graduation. You know, the one using the grace period to look for their future career and move back in with their parents. Now there’s nothing wrong with moving back in with the parents to save a few bucks, in fact, we would encourage it. What we mean is instead of waiting until the clock starts at the end of your grace period start paying down debt on day one! The sooner you can start throwing money at your student loans, the better off your future self will be.

 

Now it doesn’t have to be an astronomical amount of money. Even the smallest contribution towards your debt will help you in the long run. Let’s say that instead of going out to brunch with your friends on the weekend you decide to make it. Let’s say you usually buy an egg and cheese, on a bagel with a coffee for about $10 for simplicity. That $10 a week can turn up to $40 a month.

 

Say you took out $30,000 in student loan debt. If you completed a $40 payment every month while you’re in school, you would save $2,515 from the total of your loan. Yes, you can drop almost $3,000 off your loan by simply making a $40 a month payment. Small sacrifices make all the difference in paying down your student loans before graduation.

 

It’s No Vacation

College in the past was seen as an experience but it is not any longer. Don’t treat your education like a vacation with a limitless budget. According to the Bureau of Labor Statistics, the annual American household cost for eating out is $3,000. Even if it’s only one person, that would count as a household. Broken down that would be $250 a month the average household spends eating out! Before you start spending money on food remember that’s money that could go towards your student loan debt. We all have to eat to live, but is eating out necessary? Try using that meal plan or doing weekly grocery shopping and meal prep.

 

Stay in Budget

Someone once said “Just because you can, doesn’t mean you should” that could not be truer here. Though you may have money for streaming services like a Spotify Premium® membership or Netflix® – doesn’t mean you should have it. In addition to cutting down on eating out, you could lose that Netflix® account. About nine out of ten college students use Netflix® according to Daily to Reader. If you’re living on campus you’re provided with free cable. Yes, the keyword being “FREE” – drop the subscription services and put them towards student loan debt. No, you won’t be able to watch the latest series of Stranger Things on your own, but I’m sure your friend or their friend has Netflix®. The Basic plan on Netflix® as of 10/2018 is $7.99 a month. Let’s take your savings from cutting back on eating out including our previous example- $100 and savings from losing that Netflix® subscription $7.99 that equates to 107.99 a month towards student loan debt. When you pay $107.99 every month towards your loan it is a savings of $7,083.71 from the total loan amount.

 

They’re Called Doctors

 

If you’ve ever seen the movie Tommy Boy you’ll get the reference. If not, you can watch the clip online. Going to school for seven years is for doctors, not the average student seeking a bachelor degree. All jokes aside, you need to do your best to graduate on time. Staying in school longer means more debt and that means more money you’ll need to pay off in the long run.

 

In recent years there has been a trend of typical 4-year degrees taking 6 years to achieve. Students who take longer to graduate are spending 50% more than participated for their degrees according to Student Debt Relief. One major tip (no pun intended) know what you want to major in before starting. It’s okay to change your major but work closely with counselors take summer classes. Do your best to stay on track for your estimated graduation date.

 

Evaluate Loans

Yes, you finally graduated! Don’t be fooled the work doesn’t stop. To continue being a financially responsible borrower you’ll need to evaluate the types of loans that you have. Do you have federal or private loans? The type of loans that you have will have major implications on the options that you available to you moving forward.  Pay attention to your interest rates and knowledgeable regarding repayment types.

 

Be wise; if you are within that 6 month grace period, continue to make those payments because we know that they will pay for themselves and then some. Create a long-term plan to pay down your debt. Use your income to create the long-term plan and stick with your budget. There are so many resources available at your fingertips to research things like loan consolidation, student loan refinancing, student loan forgiveness, and deferment and forbearance.

 

Your responsibility for staying a responsible borrower is to continue those healthy spending habits that you created for yourself in college. In addition you should look to further your education. Do you want to get a Master’s Degree? Use reliable sources and stick to a budget and long-term plan. Education is so no joke. Whether you’re the currently enrolled graduate student, a recent graduate or a Doctorate student debt doesn’t have to weight you down forever.

 

Learn More About Grace Periods

 

NOTICE: Third Party Web Sites
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.

Stop the Trend Spending™

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

 

 

NOTICE: Third Party Web Sites
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.

10 Facts About Student Loans That Will Save You Money

Many millennials are first-generation college students, which is awesome! Going to college is a huge achievement, and you should be proud of your hard work. Navigating the financial side of college, however, can be a little tricky. There are definitely some basic facts you should know—all of them will save you money. We’ve compiled 10 facts about student loans that will save you money. Make sure you’re reaching out to your school to see what resources are available to you and read up on how you can make good borrowing choices.

  1. Not all student loan servicers are created equal.
  2. Small differences in interest rates and origination fees can mean BIG dollars down the road.
  3. Keeping an eye on your principal can help you understand the repayment process.
  4. It could behoove you to pay interest while in school
  5. Deferment is a short-term solution that you should avoid if possible.
  6. There are different reasons to consider fixed or variable interest rates.
  7. You pay taxes on forgiven loan amounts.
  8. You might qualify for loan forgiveness.
  9. There are options if you can’t pay. Don’t try to hide.
  10. Some borrowers save tons of money with refinancing.

 

Click Here to See What You Could Be Saving 

 

Not all student loan servicers are created equal

Some people think that getting a student loan from any company or bank is roughly equal. Maybe the interest rate will be a little different, but they all offer mostly the same thing. Sadly, too many millennials have found out the hard way that some student loan companies are not as reputable as others. Whether it’s a lack of payment options, little to no deferment even, or just plain difficult customer service, there are a lot of reasons why shopping around for the best service and best options can save you time and money in the end.

 

Small differences in interest rates and origination fees can mean BIG dollars down the road

The interest rate you pay for borrowing money is a percentage that’s calculated based on the principal or the amount borrowed. Interest rates might be fixed or variable, depending on your loan, and knowing the difference will save you big money. For instance, if you get a loan with a variable rate because it’s low now, you need to know how high the rate could go, which might affect your decision. When comparing loans, check the interest rate, but also look at the life of the loan and other associated fees. For example, some lenders or products charge an origination fee as well. Here’s a scenario to show how some of these variables play out:

  • A student takes out a $20,000 loan with a 7% interest rate & 0% origination fee. This loan accrues interest monthly and when it capitalizes at repayment 48 months from now, this student will have an outstanding balance of $25,600.
  • A student takes out a $20,000 loan with an 8% interest rate & 4% origination fee. This loan accrues interest monthly and when it capitalizes at repayment 48 months from now, this student will have an outstanding balance of $27,456.

It might look like a minor change, but these small differences matter a lot!

 

Keeping an eye on your principal can help you understand repayment progress

Your principal and payoff balance will appear on your loan statements and you should note those amounts each month. Obviously, you want to see them trending down, but sometimes watching your principal balance each month will help you realize how much more impact you could have on your loans if you increased or restructured your payments.

 

It could behoove you to pay interest while in school

There’s one reason why paying even just your interest payments on student loans while in school is a good idea: compound interest. Compound interest is when your interest gets added to the principal. When this happens, your principal is higher, and you end up paying more interest. To combat it, pay interest payments! If you make these small payments while in school, you won’t graduate with even more debt than you actually took out. If you continuously defer your loans, the debt grows and grows until you start paying. This is how some people get into a lot of trouble!

 

Deferment is a short-term solution that you should avoid if possible

Student loan deferral can sound like a great deal if you’re in dire straits, but there are a lot of reasons why you should avoid student loan deferral or forbearance if at all possible. These options increase your debt and add fees to your loan. If you’re in an extreme situation and have to defer payment or two that you can catch up on in a few months, you do what you have to do. But don’t opt to defer just because you want more money for something like a wedding when you could find other ways to save.

 

There are different reasons to consider fixed or variable interest rates

Government loans are always fixed-rate, but private loans can be fixed or variable. Knowing the benefits and possible downside of both options can help save you money when it’s time to decide which loan to get. With a fixed rate, you know what you’re going to pay for the life of the loan. Variable rates are not so certain. You might start with a low rate that goes up over time or vice versa, but they also generally start lower than the fixed rate. Consider how the variable rate is set and whether you’re okay with a variable rate or would prefer the fixed amount.

 

You pay taxes on forgiven loan amounts

Student loan forgiveness can be a great thing since your remaining balance after 10, 20, or maybe 25 years is forgiven. Many people don’t know, however, that current IRS rules require the forgiven loan amounts to be treated as taxable income. That means you could be on the hook for a hefty tax bill when you least expect it. Knowing this information could change the way you pay your loans, or at least prepare you for what’s at the end of the rainbow.

 

You might qualify for loan forgiveness

Speaking of loan forgiveness! Only you can figure out if you qualify, grasshopper. The government doesn’t keep track of this, and the rules for qualification are rigid. Be sure that you know your qualification status before you start planning your “student loan forgiveness day” party. Check out our blog on student loan forgiveness.

 

There are options if you can’t pay. Don’t try to hide (other word choices for ‘hide’ – run, ignore it, lie, pretend it’s not there).

The worst thing you can do is ignore student loan payments. Student loan companies have ways of getting money from you even if you’re hiding under a blanket in mom and dad’s basement. If you ever can’t pay your student loans, call them immediately and talk about options. You might be able to set up a new payment option or refinance to save some cash and keep making payments.

 

Some borrowers save tons of money with refinancing

There are many ways to save money with refinancing. For instance, if you consolidate private and federal student loans into one monthly payment, you might be able to score a lower payment. If you have several loans with high-interest rates or if rates have gone down since you borrowed, refinancing your student loans can save you bundles.

 

Common Misconceptions About Student Loan Forgiveness 

How Much of Your Income Should be Going Toward Rent?

You’ve got that first job or a new job. Maybe just got a raise or your moving to a new city, that’s awesome. You’re excited about this new chapter in your life and then you find, “woah, rent is really expensive!”  That’s likely what you’re saying as rising rent is outpacing income in most major cities in the country. So, what do you do? How much can you afford? How much should you pay? Well, you’ll find the standard answer is 30%, but it’s not that simple. Every situation is different and there are a lot of things to consider but don’t worry, you’ll figure it out and you probably don’t have to live in a van down by the river, unless that’s your thing.

How much are you really making?

First things first, you need to know how much you’re really going to be bringing home from that paycheck before you know how much you can really spend on rent. People often base their rent on their annual salary, which can really leave you hurting financially because they haven’t considered things like taxes, health insurance, 401ks and other deductions. Here is a good paycheck calculator to help you get to a more reliable number to work with. After that you need to calculate your debts, be it credit cards, auto loans or student loans.

Figure out what you really need.

This isn’t just a tactic to be really frugal, it’s pretty fundamental. Do your research. Know yourself, your habits and what’s realistic for you and the city you are going to live in. Living in the suburbs may be an attractive option because it’s cheaper, but maybe you don’t even need a car? Could walking and public transportation be enough to get you around? If you are moving to a new town or city that you’re not really familiar with, try and stay with a friend or rent an Airbnb for a couple of days in an area you’re considering. It can be a great way to prioritize what is going to be most important to you. You’ll often find that some things that seem like important must-haves could potentially be needless costs.

So, what’s the answer?

You’ve figured out your salary. You’ve weighed your priorities. If you’re like most people, you’ll find that the decision still isn’t easy. If you need something more concrete to avoid yourself financial heartache in the future, try following the 50/20/30 rule. That’s 50% towards the must-haves like rent, utilities, transportation, and food. 30% towards fun and 20% towards savings and/or paying off debt, like cars, credit cards, and student loans. As an example, the average rent in Manhattan, NY is $3,100 for a one-bedroom. In order for that to be a financially sound decision, you’d want your monthly take-home pay to be above $8,300. Using a rent affordability calculator is another great way to see if a particular rent amount would work well for your budget or not.

If all of this still sounds totally unrealistic to you then you may have to look to alternatives like having a roommate, especially if your situation is more temporary. If you know you’re definitely going to be staying somewhere for a while, you may be able to negotiate with your landlord or rental company for cheaper rent.  if you can commit to an 18 or 24-month lease. No matter what you decide to do, just make sure you give it some good thought. Save where you can and spend on what’s important to you.

 

Click Here to Learn About the 50/20/30 Budget

 

Supporting Articles:

https://www.apartmentguide.com/blog/percentage-annual-income-rent/

https://www.nytimes.com/2016/10/23/realestate/how-much-of-my-income-should-be-budgeted-for-rent.html

 

Millennials – How to Travel Using Your Loan Savings

Our customers have reported that they are saving an average of $309 every month and should see an average of $20,936 in total savings after refinancing their student loans with Education Loan Finance*! What could you spend your loan savings on? Millennials are traveling more than any other generation right now, so it’s likely that a good trip is at the top of your list. If you are using possible loan savings to travel, here are some ideas of where to go to put those savings to good use with an affordable vacation this year:

Ready for a new passport stamp?

According to a study done by Hitlist, Phuket, Thailand is one of the most-desired travel destinations for millennials. You can actually book 3-star hotels there for as low as $20 per night. Head there to see some of the most beautiful islands and bluest oceans in the world.

Lisbon, Portugal is rich in history and is one of the least expensive cities in Europe. Eating at local restaurants and using public transportation are good ways to keep the budget low. To discover the best local restaurants, ask someone local, whether that is a guide or someone that has lived or traveled there before. You can search online for restaurants and reviews as well, but it is often more authentic to explore the city and observe where locals are stopping in for a bite. Be prepared for the staff at these restaurants to not speak English.

If you are looking to stay in a budget hotel, check out websites like Trip Advisor or Budget Places to find and compare options and read reviews. As for flights, try to be open to flying on different days of the week. A flight on one day versus another can make a big difference in price.

When searching for a place to go or a place to stay once you’ve decided on your destination, think about communication. Most cell phone providers have international service that you can purchase at an extra cost, but if you’re looking to save money, try to find a city or country that has a lot of available Wi-Fi for free, especially in the hotel/hostel/Airbnb you book. You can use apps like WhatsApp or Skype to make calls and text once connected to Wi-Fi.

Remember that traveling in foreign areas can be dangerous and you always want to be aware of what’s around you and how to stay safe. Here is a list of safety tips to consult when traveling both abroad and within the U.S.

Looking to relax on a beach?

Inexpensive beach vacations are available in countries all around the world. If you are able to buy a ticket for an international flight, try some inexpensive beach towns like Corfu, Greece or Valle Gran Rey, Spain. In the Caribbean, go for Curacao or Puerto Rico.

Puerto Rico was devastated by hurricanes in 2017, but most hotels have reopened their doors. Since tourism is a huge industry there, taking a vacation and spending money at restaurants and shops can help the island continue to bounce back. If you are trying to stay within the U.S., places like Gulf Shores, Alabama or Galveston, Texas are good options. Be sure to check weather patterns and on/off seasons. If you are comfortable with slightly cooler weather, most beach towns will be less expensive during those parts of the year.

Want to stay within the U.S.?

If you don’t have a passport, don’t want to spend long hours flying, or just want to save on airfare, you can find many exciting destinations right here in the United States. Three of the most-desired vacation spots for millennials were in the U.S.: Cambridge, Massachusetts; Portland, Oregon; and Ann Arbor, Michigan. Cambridge is just outside of Boston and is the home to Harvard University. Portland is famous for its parks and gardens. You can take in a college football game in Ann Arbor or visit one of its many breweries. To keep costs low, since it’s possible you’ll be using your loan savings to travel, look for an Airbnb. These are often priced lower than traditional hotels.

Open to spontaneity?

Try out this website called Pack Up & Go. This travel service plans your entire 3-day trip in the U.S. for you – and you don’t know where you’re going until you leave! You start by selecting your price limit, then fill out a survey that asks you questions like what your hobbies are, where you’ve been in the last few years, and what you prefer to do when you travel. A trip is booked for you, all the documents you need are sent in a sealed envelope, and then you open it on the day you are to depart. You can travel solo by plane or train starting at $1,000 or take a road trip with friends starting at $400. Pack Up & Go gives you the option to start cheap and spend money while you’re there or even take more than one trip.

Love a cruise?

Cruises are often thought of as a budget-buster, but that is not always the case. There are plenty of cruises for those looking to spend less. Cruises allow for the opportunity to visit several countries, islands, or cities all in one trip. Have kids? There are Disney cruises available for a family of four for less than $3,000 total. Traveling solo? There are plenty of cruise options from Norwegian’s Sail Away program that are on the cheaper side. A tip for money-saving: book excursions outside of the cruise line’s options; they’re often much less expensive.

Searching for adventure?

Millennials often look for an adventurous experience when deciding on a vacation. Affordable adventures are all over the world. If you like snowy mountains where you can ski or snowboard, check out the budget page on Ski.com.

Cairo, Egypt is another top destination for millennials, where you can take a safari, ride a camel, cruise on a quad bike, visit the Giza Pyramids, each for less than $100. Hostels there can be as cheap as $10 per night, so you can focus on spending your money on your experiences. You can head to Peru to hike and explore Machu Picchu for affordable prices. If you love surfing, Uluwatu, Bali, Indonesia may be the choice for you. Affordable hotels and hostels are common, and all you need is your surfboard.

Creating Additional Savings

Traveling can be a great experience, but with no additional funds you can feel rather grounded. Keep the adventures to your travel and don’t include them in your financial decisions. The more financially responsible you are, the more likely your 10 year later self will thank you. In order to gain savings be sure to consider refinancing any student loan debt you may have for a possible lower interest rate. Remember you could save $309 a month*!

Check Out These Personal Finance Apps

* Average savings calculations are based on information provided by SouthEast Bank/ Education Loan Finance customers who refinanced their student loans between 8/16/2016 and 10/25/2018. While these amounts represent reported average amounts saved, actual amounts saved will vary depending upon a number of factors..

Should I Open an HSA?

Few things have the potential to wreck your financial wellness quite like your physical health. A lingering ailment or a sudden injury can throw a wrench into your finances with enough force to ripple into the ensuing decades. It’s wise to carefully consider the various protective measures available to both reduce the worry of something happening, and soften the blow.

What is an HSA?

Traditional Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) plans cover most expenses with a percentage based co-pay and relatively low deductibles. The Health Savings Account (HSA) allows for a much more individual approach to health care. With an HSA, you can make pre-tax contributions into a special savings account and simultaneously lower your tax burden.

Not to be confused with a Flexible Spending Account (which can only be established by your employer), you can open a Health Savings Account through your employer or as an individual through your bank.

The primary requirement for an HSA is to be enrolled in a High Deductible Healthcare plan (HDHP). These plans come with a minimum/maximum deductible of $1,300/$6,500 for individuals, and $2,600/$13,100 for families. Other requirements include that you not be covered under any other healthcare program and not be claimed as a dependent on anyone else’s taxes.

How to take advantage of the HSA

Think of it as an emergency fund specifically for your medical expenses. By assuming greater responsibility for covering your own medical expenses, you can significantly lower your monthly premium and can instead put that tax-free money into an HSA.

Obviously, if a medical issue arises, you’ll have to pay the entirety of your deductible before your HDHP provider will step in to assist. This is where your HSA can come in handy to help supplement your out-of-pocket expenses.

While there is a limit to your annual contribution ($3,400 for self-coverage and $6,750 for families), the money in your HSA can be rolled over year after year, thus building a more substantial safety net for you and your family. If you’re currently healthy and are willing to wager against the possibility of a serious accident, the HSA is a great option for incredibly affordable healthcare.

Downsides of HSAs

There are, of course, a few downsides to both the HDHP and the HSA if you were to have a serious accident or suddenly become ill. Unless you’re a few years into your account and have diligently built up your savings, it can be quite difficult to meet the high deductibles even with your HSA.

Another common drawback for HSAs is that you may be reluctant to seek healthcare when you need it, because you don’t want to dip into your savings. That’s the same thing as shying away from your emergency fund when you have an emergency. The HSA is intended as a buffer and shouldn’t discourage you from getting help.

Misconceptions of HSAs

HSAs also have common misconceptions about their practicality that are certainly worth noting. While there are substantial tax benefits associated with HSAs, some people are tempted to use HSAs as a generic emergency fund. Since early withdraws and fees on nonmedical expenses are taxed 20% (ouch!), it’s probably best to avoid this method at all costs.

Furthermore, HSAs can lure customers with their investment potential in mutual funds and stocks. Unfortunately, their ability to be invested doesn’t necessarily translate to a high investment return. Experts advise customers to think carefully before signing up for a high deductible health plan, especially regarding their investment capabilities.

Run the numbers, trust your gut

At the end of the day, health care is all about running the numbers and weighing them against your peace of mind. “How much is enough coverage for the next year and how much is it going to cost me?”

HDHPs and HSAs are a good form of insurance if you’re young and healthy. The tax advantages and investment capabilities of an HSA and HDHP should in no way influence your decision. Your decisions should be based off the amount of premiums you’ll save, the deductible proposed for a comparable PPO plan and the out of pocket spending caps associated with each policy. Basically…do your research, watch your health and plan accordingly. Simple enough, right?

See How the 50/20/30 Budget Could Help With an HSA

Zero Based Budgeting

A budget is the most important aspect of your finances. Whether you make $20K a year or $200K; you need to have a plan for your money. If your personal finances were a business and you didn’t keep track of your annual income and expenses, you’d have to close up shop pretty soon. There are dozens of budgeting methods and, in truth, one is not better than the other. The budget you choose is a matter of preference, and as long as you stick to it, you can theoretically reach any financial goal you could conjure up. Let’s take a look at zero based budgeting and if it is the right budget for you.

If you’re like most recent grads, you’re still getting a handle on your finances, likely juggling student loan payments, low starting salary, and a few vague ideas of what you’d like to see in your financial future. As such, many shy away from a budget, believing their financial troubles to be out of sight, out of mind. Unfortunately, money doesn’t work this way, and if you don’t take control of it, it will almost certainly take control of you.

Zero Based Budgeting

Because mindless spending is such a common pitfall, the Zero-Based Budgeting method has become widely used. The point of zero-based budgeting is to assign every dollar of your income with a task so that you avoid careless spending. In theory, if you have a comprehensive budget that accounts for everything BEFORE each month begins, you shouldn’t have any cash left over to waste throughout the month.

When you look at your monthly income, you should have a very finite number to work with. Acting like it’s an arbitrary number is the same thing as saying you have about 24 hours in a day. You have exactly 24 hours in your day, and you have exactly X amount of income every month. How you choose to spend those hours is completely up to you and the possibilities are limitless, just like your finances.

The zero-based budget balances a diligent tracking of last month’s expenses with a mindful forecast for next month’s. Because it takes some thorough crafting, you shouldn’t expect to nail this in your first couple months, nor should you anticipate it being a one-and-done deal. By design, it will need to be flexible, like extra cash for your A/C bill in the summer or holiday gifts at the end of the year.

Name every dollar

You have to give a name to every dollar coming in the door so that it has a specific purpose when it goes out the door. If you can’t, that’s a great indication of where your mindless spending is. If you’ve accounted for every foreseeable cost and still have a couple hundred bucks floating around aimlessly, add them to your emergency fund or investment portfolio. Shave $100 off your electricity bill in the spring? Stash it away in your holiday fund for a colder day. Find $20 on the street? Ok, that’s pretty rare so you’re off the hook on this one.

Think before you swipe

Look, the point is – be mindful with your money. You’re smart. You’ve lived enough life to know your spending habits, and sure, maybe you have some bad ones here and there. But ignoring them is not going to make them disappear. That’s why enlisting a proper budget will draw attention to the problem areas and empowers an opportunity for change.

 

6 Financial Independence Blogs You Should Read

Forgo Deferment & Forbearance on Your Student Loans

It’s tough to cover a mortgage, wedding, new baby, or medical expense on top of your student loan payments. As such, it can be tempting to request deferment and forbearance on your student loans. Before you apply for these options, be sure to understand the hidden costs that can lead to a much higher, much longer repayment down the road.

Both federal and private student loan programs offer deferment and forbearance options. These options provide you with temporary relief from your burdensome monthly payments and may seem like a good option to avoid a delinquency or default. Think again. Not making payments during your deferment and forbearance periods results in the capitalization of the interest you owe, meaning your loan principal will subsequently increase. Voila! Not only have your monthly payments ballooned when you inevitably start making payments again, but you now owe way more than you did when you first took out the student loans!

Deferment

Deferment is pushing back payments due to a temporary situation and your loan provider has a list of qualifications. The most common types are In-School Deferment, Graduate Deferment, and Military Service Deferment. For Parent PLUS Borrower loans, it is only available to parents who received Direct PLUS Loans or FFEL PLUS Loans. The deferments listed below are available to Direct Loan, FFEL Program loan, and Perkins Loan recipients only as per the Federal Student Aid government website. Types of deferments available differ based on your education loan lender, but there are commonalities between all private student loan debts. According to US News, private lenders can offer deferment relief for up to 6 months, or in extreme cases 12 months.

Federal Student Loan Deferment Types

  • In-School Deferment Request
  • Parent PLUS Borrower Deferment Request
  • Graduate Fellowship Deferment Request
  • Rehabilitation Training Program Deferment Request
  • Unemployment Deferment Request
  • Economic Hardship Deferment Request
  • Military Service and Post-Active Duty Student Deferment Request

It sounds like a great deal, but remember – you’re increasing the principal balance of the loan and prolonging the inevitable. Let’s say that you chose to defer your loans. As per MarketWatch, the average undergraduate student comes out with $37,000 in student loan debt. Think the cost of an undergrad degree is a lot? The average cost for a law school student that graduated from a private college is $122,158 according to Forbes. Even more unbelievable is the average Medical School Debt at $189,165 as per Modern Healthcare. Check out our chart below to see the hidden costs associated with deferring your student loan payments. Calculations as per those listed in College Reviews.

Undergraduate Deferment Loan Costs

Total Loan Cost Interest Rate Deferment Period Loan Length Total Debt After Deferment Total Increase in Debt
$37,172 8.25% 12 months 10 years $40,238 $3,066
$37,172 8.25% 24 months 10 years $43,305 $6,133

Graduate Deferment Loan Costs

Total Loan Cost Interest Rate Deferment Period Loan Length Total Debt After Deferment Total Increase in Debt
$140,616 9.50% 12 months 10 years $153,974 $13,358
$140,616 9.50% 24 months 10 years $167,333 $26,717
$161,722 9.50% 12 months 10 years $177,085 $15,363
$192,449 9.50% 24 months 10 years $167,333 $30,727

Forbearance

Financial responsibility starts with taking charge of your financial obligations and developing a sound monthly budget. However, what happens if you unexpectedly lose your job or are unable to work due to medical reasons? You suddenly find yourself in financial hardship and may turn to your student loan provider to seek forbearance options.

Similar to deferment, each loan provider and loan type has a unique set of guidelines to qualify for forbearance. Unlike deferment, forbearance could potentially affect your credit. The guidelines for qualifying for forbearance are different for the federal and private student loan programs, so check with your loan servicers and lenders to determine what forbearance options are available. According to the Federal Student Aid site, there are two types of Forbearance for Federal Student Loans- General and Mandatory.

General Forbearance

According to the government Federal Student Aid site, General Forbearances are used when you cannot make a monthly payment. Direct Loans, FFEL Program loans, and Perkins Loan borrowers qualify for this type of forbearance. Types of General Forbearance as per the Federal Student Aid site.

  • Financial difficulties
  • Medical expenses
  • Change in employment
  • Other reasons acceptable to your loan servicer

Mandatory Forbearance

If you meet the requirements for this type of loan, your loan servicer is required to grant you forbearance. Mandatory forbearance is only provided for 12 months. If you still qualify at the end of the 12-month period, you must resubmit your information. As per the Federal Student Aid site, here are the types of Mandatory Forbearance:

  • Medical or Dental Internship/Residency, National Guard Duty, or Department of Defense Student Loan Repayment Program – (Direct Loans and FFEL Program loans only)
  • Student Loan Debt Burden (Direct Loans, FFEL Program loans, and Perkins Loans)
  • AmeriCorps Forbearance (Direct Loans and FFEL Program loans only)
  • Teacher Loan Forgiveness Forbearance Request) (Direct Loans and FFEL Program loans only)

Once you qualify for forbearance, there may be a time period in which you may need to reapply in order to continue receiving benefits, as well as a maximum time they’re available. Keep making your monthly payments until forbearance is granted by your lender, as a delinquency on your monthly payments can result in a negative hit to your credit score. Just like deferment, most student loans in forbearance will accrue interest which gets capitalized and added to the principal amount of your loan. Therefore, this seemingly attractive option to postpone your monthly payments during an unexpected financial hardship ultimately further enslaves you to your student loans.

Although deferment or forbearance may seem like a tempting option, it isn’t always the best path forward. Making even a partial monthly payment is better than making no payment at all. Watch your budget closely and get creative with the steps you can take to avoid deferment or forbearance.

Refinancing your student loans is another great option to consider, just be sure to find a reputable lender like Education Loan Finance. By consolidating private and federal student loans into one monthly payment, you may be able to reduce your student loan payments enough to help you afford that wedding or down payment on a home.

 

Our Simplest Guide to Student Loan Refinancing

Why It Is Time to Say “No” to Retail Therapy

A wise blogger at Forbes recently said, “The road to bankruptcy is paved with good deals.”

Think about it. Each of us has a favorite store, accessories, tech goods, or some other non-essential item that is either just a little too pricey or is simply out of our budget…that is, until a sale hits — at which point, all budgeting bets are off.

If you want to start saving money, paying off debts, and generally begin to improve your financial situation, this has to stop — right now. Stop letting the blow-out sales blow out your budget. Not sure where to start? Try your closet.

For many people, one of the biggest budget-busting expenses is clothing. While the U.S. apparel industry is a smart $12 billion business, our ability to see and be influenced by more people, thanks to the internet, has caused us to continuously want more, want to look a certain way, and to splurge. These spending habits on clothing, according to the Bureau of Labor Statistics, mean that the average American family is annually spending somewhere around $1,800 on apparel and services (2015 statistics). Furthermore, as clothing prices have dropped over the decades — and as each of us are increasingly willing to place non-essentials on credit cards — purchasing extraneous wardrobe items has become too simple. For example, today’s American woman owns roughly 30 outfits, but in the 1930s, that number was nine. NINE outfits. Regardless of the actual number of items in your wardrobe, chances are that most of us do not even wear half of them, even if seasonal pieces are excluded.

As the average home size increases, our collective desire for more “stuff” is further depleting our hard-earned dollars. Furthermore, this “shopping for sport” or retail therapy takes up valuable time, both for shopping and maintenance, that could be spent in more productive ways, such as learning something new, building a career, spending time with family, researching more ways to save money, or doing other healthy things like exercising or sleeping.

6 Ways to Say “No” to Retail Therapy

  1. Banish the idea of retail therapy. You do not need more clothes to be happy and, chances are, your spending in this category could be causing you stress.
  2. Focus on quality clothing over quantity. Invest in a few timeless clothing pieces that will last longer, rather than buying more cheap clothing pieces that will go out of style or deteriorate quickly.
  3. Before you buy anything, ask yourself if you really need it, if you already have something like it, if it is worth “X” hours at work, or if it fits into your budget. In most cases above, if the answer is “no,” do not purchase it.
  4. If you do buy something, save the receipt. Return it if you do not wear it within a week.
  5. Start rediscovering what you already own! Revisit your wardrobe to find new ways to put outfits together. Need some inspiration? Check out Pinterest. Only pin outfits that you already have the pieces to complete the look or something similar. While you are working on your closet, cull it of any clothing that just is not working for you anymore.
  6. Create a capsule wardrobe. If you can, try to create one that mostly features pieces you already own — but make sure you love 100% of them. A capsule wardrobe is a versatile, minimalistic wardrobe that is meant to de-stress the idea of getting dressed, ensuring that you are going to love what you have to wear, all while minimizing spending habits on clothing. To achieve your ideal capsule wardrobe (a wardrobe that really suits your style), you may have to do a little shopping, but any wardrobe pieces you buy should fall under the principle of quality over quantity.

Going through your own closet to see what you already own — whether to rediscover or to build a capsule wardrobe — is a great way to appreciate what you already have, but it is also a great way to declutter and destress your life. Putting the brakes on a shopping habit, all while honing in on your ideal wardrobe, can be a great way to maintain a budget and feel great about what you already own, so let this be the year you say “no” to the idea of retail therapy and say “yes” to better finances, less stress, and a happier you!

How to Budget Using the 50/20/30 Rule

One of the first steps to financial success is learning how to budget and sticking with it. Setting up a budget provides visibility and control over personal finances, allowing individuals to track how much they are spending and where and helping them avoid frivolous spending by staying within set limits. However, traditional budgets are not for everyone and for young professionals at the beginning of their financial journeys or business owners and freelancers who might have irregular incomes, sticking to a complex budget may be difficult. Fortunately, there is a different approach to budgeting that is more flexible and easy to use — the 50/20/30 budget.

 

This budgeting system is perfect for people who think they are “bad” at budgeting because it does not require meticulous record-keeping or maintenance. Instead, it is simple and less stringent, and can really work where traditional budgets have failed. The 50/20/30 budget works on a percentage system, with 50 percent of total income going toward paying fixed expenses, 20 percent is allocated to savings or other financial goals, and the remaining 30 percent is flexible spending money. Let us break it down a little further:

 

50% – Fixed Expenses/Essentials

 

Instead of allocating money into dozens of different categories as one would in a traditional budget, a 50/20/30 budget only has three categories. The first, and largest, is fixed expenses or essentials. These expenses are the things that take precedence over all other expenses, as they are the things you cannot live without. These include rent or mortgage payments, insurance, utilities, auto or education loan payments, and anything else you consider essential.

 

Groceries are essential expenses as you cannot live without food, but because buying groceries is a variable and not a fixed expense, it can fall under the essentials category or the 30 percent flexible spending category — this is completely up to you.

 

20% – Savings/Financial Goals

 

Remember the financial goals you set last month? This is where they will go. Money that goes to this category is for saving or investing. Whether you are saving to build an emergency fund, putting back money for retirement, or trying to pay off your student loans or credit card debt faster, 20 percent of your take-home pay should be allocated to this category.

 

30% – Discretionary Spending

 

Here is the fun part — the remaining 30 percent of your income is for flexible or “lifestyle” spending. These are things that are not necessarily needed, including travel, clothing, eating out, entertainment, gifts, and anything else on which you enjoy spending money. This percentage is intended to make life fun; however, if you find yourself needing to cut back on spending, this category should be the first to go.

 

The Perfect Budget for People Who Need Flexibility

 

One of the greatest benefits of the 50/20/30 system is flexibility. If you are at a time in your life when you want to achieve a financial goal, such as buying a home or paying down debt faster, you can adjust the percentages you allocate to each category. For example, if you total the costs of your fixed expenses and they equal 53 percent of your total income, you can adjust your discretionary spending category to equal 27 percent each month. It is all about what works for you and your particular financial situation. If you are notoriously “bad at budgeting,” and you have only tried traditional methods, this may be the right method for you.

 

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