Category: Saving and Investing

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How to Invest in Real Estate

Real Estate Investment Options

I have been doing a lot of research into alternative investments, after watching the crazy see-saw that the stock market has been over the past few years. I have a desire to create a secondary source of income, as it is all too easy for a person to lose their job when the economy takes a hit, or if they get hurt and can’t work.  I have a financial advisor, and he always tells me just to stay the course, and keep buying when stocks are low and when they are high so that it “dollar cost averages”, meaning the amount they are worth evens out over time and eventually makes a profit. The funny thing, is that most of that profit seems to appear when I am a very old woman, and probably won’t be doing much with it. In the meantime, I work myself to the bone, and put money in the stock market, which often feels like throwing it away, all while hoping I have enough to retire before I die. This is what made me start looking into other ways of building wealth. 

There Are Many Options in 2022

One of the standout options is to start investing in real estate. I have wanted to do this for many years, but I never seem to have enough capital to buy another house, let alone several. I started watching the real estate investing gurus and mentors that are all over the internet, and doing my own research on sites like Bigger Pockets and Roofstock. I have also watched hundreds of hours of webinars and free trainings online, most of which culminate in someone selling something. They do have some good information, though. These online gurus tell you about creative financing without using your own money. There are various angles of this approach, one of which is wholesaling.  What it boils down to is you have to a. convince someone to sell their house at a discount and get them to sign a contract, then b. quickly find someone else who wants to buy it for a little more, and you make the difference as a finder’s fee. You have to be very careful, though, because if you do it wrong, or ask the wrong people it could be illegal, or you may get scammed by the person supposedly willing to buy it. It is possible to do, and it seems people can make a lot of money doing this, but I struggle with it, because I am not an outspoken, hustler type person. I would have a very hard time talking to people and trying to get them to sell their house to me, while relying on someone else to actually come up with the money. I am a pretty linear thinker, who loves to have a strong plan with contingencies, and this seems like a lot of moving parts and potential pitfalls. 

The gurus also tell you about using other people’s money, or OPM, to fix and flip houses. The concept starts similarly to wholesaling, where you have to find a house at a discount. Then you get someone to invest the money, plus the amount needed to fix it up. You could get your own financing for this through a bank, as well, but of course you need to have the money for the down payment and close. This amounts to somewhere around 25% of the selling price. After you fix the house up you can sell it for a profit, or keep it and rent it out. If you can’t come up with that kind of down payment, there is the option of house hacking. This is where you would buy the house as your own place to live, typically requiring much less up front, like 5-8% with closing costs, give or take. The catch is, you have to stay there for 2 years, or at least not rent it out for that long, in order for it not to be mortgage fraud. During that two years, you would renovate the home, and then you could sell it or rent it out. 

There are some ways of investing in real estate that are less hands-on. You can buy the lien on a house, with the idea that the person who owes it will pay you back with interest or else forfeit the home to you. You can join a crowd funding site, where you buy shares of a large conglomerate of real estate, without owning the individual assets directly, but getting returns over time as the asset appreciates and is sold, or sees returns from rent. This is the idea behind Fundrise. They are a reputable company that sells e-shares of properties, which are not publicly traded in the stock market. The money you invest gains value as the assets appreciate, and you have the option of liquifying your investment quarterly, provided the market is not in too much of a spiral. Fundrise has the ultimate say in whether or not they can liquify your shares, based on if they can get someone to buy them, or whether it would cause them a loss. They expect people to look at the investment as long term, like any real estate investment, and keep their money in place for at least 5 years to see the most return. You can also invest in Real Estate Investment Trusts, or REITs, in much the same way as you would invest in stocks. You buy shares of theses funds, that are representing companies who invest in real estate, and as their profits increase they are distributed to shareholders proportionately. The great thing about these is that the money is still fairly liquid, meaning you can decide to sell your shares and have the money in your bank account in a matter of days, just as you would a stock that you sell. The bad part, is that it is essentially like owning stocks, and subject to some volatility. 

All real estate investing, and really any investing, comes with risks. Your money may not make any money at all. It could even lose value. Your money may not be available for withdrawal for many years. If you are investing in rental homes, you have all the responsibilities of a  landlord, and your investment could actually cost you more than it makes you. Statistically, real estate is considered more profitable and less volatile than the stock market, and has been known to build people’s wealth over time. It does have some major drawbacks, and it can be very expensive to get started, but if you go into it expecting to stay invested long term, and willing to accept the risks and downsides, it is still an investment many people will be happy they ultimately pursued. The most important thing is to do your research, and know what you are getting into before you do it. I will continue to post information that I learn about real estate investing, so keep visiting FinancePlainandSimple.com to learn more.

 

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Playing the Stock Market with Apps

These days, you don’t have to work on Wall Street to invest in the stock market. You don’t even have to be a finance professional. With as little as $5, you can invest in a piece of your favorite company via an app, like Stash, Acorn or others. What’s not to love?

Stock Market Investing and Emotion

As you may know, investing in the stock market can be an emotional roller coaster. Stocks by nature go through cycles of loss and gain. Over time, the stock market statistically will gain value. However, an individual stock may rocket to record highs and plummet to barren lows in the course of a day. If you are like most people, your inclination will be to invest in a stock that is doing well, and avoid stocks that seem to be losing value. The problem with this is, it means you will be buying when the price is high, and maybe selling when it is low. In essence, you won’t be gaining as much, and you may be losing a great deal. As humans, it is a hard thing to overcome. They say that if you buy and hold a stock over a long period of time, or better yet own a very diverse portfolio of stocks and hold them, you will eventually see overall gains. This can be very difficult to do if you are watching your portfolio ebb and flow day to day. Most advice you will receive about investing in the stock market will be to invest in a wide range, hold those stocks while investing more money into them at regular intervals, and don’t buy and sell too readily.

I recently put some money into a Stash account, to try my own hand at stock investing. I was hoping I would be so good at it that I could fire my Financial Advisor, and do it all myself, saving me money in fees. Turns out, I shouldn’t quit my day job, or fire my advisor.

My own stock picks were averaging about an 8% gain, which wasn’t terrible. Then, I decided to sell my lower performing stocks, as the market took an overall downward turn. This resulted in my gains dropping to about 1%. Meanwhile, my financial advisor has been averaging 19% gains, and hasn’t dropped anywhere near 1%. Thank heavens most of my retirement money is in his hands and not my own.

I fell into the emotional stock buying pattern, despite knowing it was a risk. I bought stocks like Apple and Tesla when they were at record highs. This meant I paid a great deal for a fraction of a share. Then, when the stock prices inevitably fell, I lost money. They aren’t worth the amount I paid. I will have to wait until their shares are priced at what I paid now to make my money back.

This is not to say that you shouldn’t invest using these apps. Maybe you will be better at not buying and selling than I am. Just know that it isn’t as easy as it seems, and there is not shame in leaving your investing to the professionals.

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Lower Your Mortgage Payment without Refinancing

Refinancing Isn’t The Only Way to Lower Your Mortgage Payment

By now, you have probably heard of refinancing your mortgage. This is where, when interest rates drop significantly, you essentially trade in your old mortgage for a new one. The downside is that it costs you quite a bit of money. You have to pay for an appraisal and fees and closing costs just like you did with your first mortgage. It can result in you having money on hand for needed repairs or debt payoff, and a lower overall payment, which makes it overall a good idea when interest rates are significantly different than they were for your first mortgage. This is a current trend in today’s market.

Recasting your Mortgage

If your current mortgage rate is pretty good, there could still be a way for you to lower your mortgage payment. If you have a large chunk of cash sitting around not gaining much in interest, putting that money to your mortgage might be a good option. First, ask your mortgage holder if they offer what is called a mortgage Recast option, and if they do, ask them if there is a fee. I have Wells Fargo, and they do not charge anything. Recasting a mortgage is when you make a very large principal payment, and as a result, the mortgage lender re-amortizes your remaining balance. This means that the loan length and interest rate stay the same, but the payment gets lowered because you have decreased how much has to be paid off over the remainder of the loan years. For example, I currently owe about $123,000 on my mortgage. I pay $883 per month toward principal and interest, not counting the escrow (taxes and insurance). If I pay a one time payment of $50,000, my payment drops to $374 per month for principal and interest. This means I am obligated to pay over $500 less per month, which can be a life saver in case of hard times later. If I continue to pay my normal payment after making that large principal payment, my loan will be paid off years earlier. Or, I could invest that extra $500 per month, potentially making tons of extra money over time. That same $50,000 is only earning about $20 per month in interest in a savings account right now, so it seems like a good time to consider putting the money somewhere that it can at least save me money in interest.

What to Consider First

I would only consider doing this if you already have a significant emergency fund saved up. If you find that you still have a large chunk of change that isn’t earning you significant interest, it could be a good time to put that money to work. Remember, if money isn’t at least earning enough to offset inflation (at least 2% or more), then it is essentially losing value over time. Better to put it somewhere that either earns you more (investing), or saves you more (decreasing debt).

Take Aways

There is more than one way to change your mortgage payment, if you have significant savings in the bank.

Always make sure you have an emergency fund that is easily accessible before putting large sums of money into investing or recasting a mortgage, or any other endeavor for that matter. Security is essential.

Talk to your financial advisor about where to put extra savings, and consider recasting your mortgage as a possibility that may not cost you anything except the payment you put toward your mortgage.

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Financial Tips for a Merry Holiday Season

The Holidays and Money

Do the holidays fill you with a mixture of emotions, from joy and excitement, to dread and anxiety? If your finances tend to get out of control during the season of giving, you aren’t alone. Even the most disciplined of us can sometimes let the joy of giving override our sense of frugality. People tend to think more in the short term, than what will happen to us later on if we make the wrong decisions now. The fact that monstrous debt is not only a reality for most people in developed nations, but even expected, is case in point. We are given credit cards and told to spend as we will. We graduate from college with mountains of debt. We buy a house above our means because the mortgage company and “keeping up with the Joneses” says we should. Why should the holidays be any different?

Wouldn’t it be great if there was a way to make the holidays less stressful, at least financially? It turns out, there are a few tips that could help, but they take some planning. Like almost everything when it comes to money, looking ahead will get you further than spur of the moment approaches. One idea would be to set a yearly holiday budget. Then, open a savings account and set up automatic withdrawals on payday to be put into that account through the year. It doesn’t have to be much. If you get paid every 2 weeks and put aside $10 each time, by the end of the year you would have over $200. That would sure beat having to take it all out of one check. If you put it into a high yield savings account, you could even have a few dollars of free money (minus taxes) to top it off.

If you are a little more adventurous, and want to make potentially a little more money with your money, you could put that same amount into the stock market in a diversified fund. Use an app like Stash or Acorn, and you would be able to withdraw your money plus earnings by selling the stocks at the end of the year, or even just a portion of them. Beware that whatever gains you make this way do count toward your income for the year, though, and will be subject to taxes. The potential is there, though to make a decent percentage of gain, as the stock market historically makes between 6% and 10% over time.

Another idea is to keep a list of people you like to buy for in your purse or wallet. Throughout the year, as you see gifts that would suit the people on your list, you could buy them one at a time. This would spread the cost over the year, instead of having to put it all on the same credit card at the end of the year and play catch up for the following months.

Don’t forget that some people really value the thought of the gift over the cost of the gift, as well. What about making a gift for someone that touches on something personal for them? Dressing up a picture frame with glue and glitter, or special words, with a picture of you and that person together can touch a heart. Think outside the box. Spending time with your mom one-on-one would probably mean more to her than any trinket. There are probably hundreds of ideas similar to this one that wouldn’t break the bank, but would still carry meaning. Isn’t that the true idea behind gift giving, anyway? We want the person receiving the gift to know that we love them, value them, think of them, and want to see happiness on their face. That counts for you, too. The holidays should make you happy, not totally stress you out. Try one or more of these tips, and maybe one will work for you.

Happy Holidays!Resources, Tools and More Continue reading “Financial Tips for a Merry Holiday Season”

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Why the Stock Market is Booming and the Economy is Struggling

If you watch the news, you have probably noticed two things: the economy is struggling, and the stock market is booming. I always thought that the stock market was part of the economy, with the economy being the bigger picture of how the country is doing and the stock market reflecting that. I was totally wrong. The two are only loosely connected, as one can clearly tell at this point. The question is, why?

What is the Stock Market?

The stock market is basically what it sounds like: a big marketplace where people can buy or sell portions of ownership of companies and groups of companies in related industries. People who invest in the stock market are basically doing so based on what they think will happen to these companies or industries in the future. The stock market is dominated by some massive companies and industry sectors. Many businesses are not publicly traded, and thus not reflected in the stock market at all. In fact, the number of companies represented has shrunk significantly in the past decade.

What is the Economy?

This is a broad term for a country’s resources, and the demand for them. Supply and demand are terms that describe what drives a capitalist economy like the USA. There are a number of indicators that tell us if a country’s economy is doing well. These include things like the price of crude oil, consumer confidence levels, unemployment numbers, and sales of goods and services of various types. The bond yield and interest rates also play a role.

COVID-19 and Stocks

A few companies and sectors have done extremely well during the pandemic. These companies have driven the stock market to record breaking heights. There was a small dip when the country was in lockdown, but once companies figured out ways of doing business that worked even though their workers stayed at home, the market rebounded. People who were stuck at home bought things from the internet more than they did by going to local stores. This drove up the stocks for companies that provided shipping services, delivery, and essential goods and services.

Aside of increased demand for some goods and services, the stock market is based on what investors think will happen. In the case of COVID-19, it seems investors are betting that once there is a vaccine or a return to “normal”, the value of company stocks will go up. This causes investors to buy, which makes the cost of the shares increase. Also, when a company’s earnings have decreased, a temporary decrease in stock price often follows, which in turn leads to a big buy of those stocks, leading to an increase in those stock prices, all while investors hope they eventually gain even more value. The government has decreased the interest rates, so people have been putting more money into stocks than bonds, CDs and savings accounts.

COVID-19 and the Economy

America is still suffering from massive unemployment. Many businesses remain closed. The virus infection rate is increasing at an alarming rate, and there is concern that it will require a return to lockdown to get it under control. People who are out of work are facing mounting bills and little job prospects. People are not spending as much money on travel or non-essential purchases, so these businesses continue to suffer. The housing market is expensive due to decreased inventory, but may be headed for a crash as people who are currently protected from having to pay rent or mortgages are asked to do so and find that they do not have the money. This could lead to vast foreclosures. While some businesses may be doing ok as they learn to change their business model, many are devastated and have had to close their doors forever as the stimulus money that may have kept them afloat has run out.

In Summary

These are hard times, around the world and in America. There is a massive disconnect between the stock market and the overall economy, and this is highlighting the fact that the two are not the same thing at all. For most people, it is the economy that they feel in everyday life. The cost of goods and services as they rise and fall. The availability of resources, or lack thereof, as demand surges beyond supply. The loss of jobs, and the rising cost of housing and healthcare. These are the things that affect the people. So next time you see the stock market soar, do not take it to mean that the economy is doing the same.

 

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When Saving Money Can Cost You

I am sure it won’t be a surprise to hear that I tend to be a bit conservative when it comes to spending money. If you have read any of my other posts, you probably know by now that I put a lot of thought into purchases-especially those that will cost me a chunk of money. My brain can analyze the purchase to the point of insanity, and in many cases I talk myself out of buying things. Many times, this is a good thing. It decreases the number of times I have buyers regret. I rarely give in to impulse purchases. I save a lot of money by not buying things I ultimately didn’t need.

I have recently discovered the flip side of that coin. There is such thing as being too frugal when it comes to certain things in life. Sometimes saving money can cost you more in the long run. Have you ever bought the cheapest version of something, only to have it break or not work as soon as you got it home? Maybe you talked yourself out buying that tool set you have been thinking about, to have your dishwasher break two days later.

This past weekend, my wife and I thought we would have a nice day at the beach. We took the reliable car that gets the best gas mileage, and off we went. About 5 miles from the town, my car started beeping. It flashed a warning: Low Oil Pressure. We were in the middle of nowhere, on a country road with not another soul or business in sight.

I flashed back to that time a few months ago when I got my oil changed and the mechanic told me there was a small oil leak. They wanted $500 to diagnose the problem, and who knows how much to fix it. Being the skeptic of mechanics that I am, and the person who doesn’t like to spend money without knowing all my options, I declined. I thought I would have someone I knew check it out for me and verify that there was really something wrong before I got it fixed. Well, that person never checked the car out. Now, I was stuck.

I promptly called my roadside assistance company that I have had for over a decade. They are the cheap version of AAA. They cost a fraction of the price. On this day, I found out why. I was about 100 miles from home. The towing that was covered was $100. That probably translates to about 5 miles, after the hook-up fee. I was told I would have to pay the rest when the tow company arrived-a whopping $349! Also, because of COVID 19, the tow company would not allow us to ride in the tow truck, so we would have to find our own way home, with our 120lb dog, to boot. What choice did I have?

I then remembered that my friend happened to be camping in the town that I was now stranded. I gave her a call, and she and her husband came to the rescue. They offered to use their AAA membership, which covered up to 200 miles of towing, plus a rental car and hotel if needed. I asked her what she paid for that kind of coverage, and it turns out it is less than the $349 I was going to have to pay for towing. So, for a lot less than I would pay for one tow, she had peace of mind in knowing that in this type of event she was completely covered for towing and for her own accommodations and ride home. Suddenly, my discount roadside assistance service didn’t seem like such a bargain. My frugality would now cost me a lot more money, and stress.

Take Aways

This was a blatant example of how there can be times that being too frugal can bite you. If you save money, but then have to buy something more than once, or what you bought does not actually provide what you need, then you may not really be saving money at all. You might even create a lot off stress, or get yourself into a sticky situation. Sometimes paying a little more for something will actually be the better bargain. You need to really evaluate your purchase to know if it is something where the cheap version is really worth the initial savings. Although nowadays it isn’t always true because things just don’t seem to be made to last, when it comes to services and some items, sometimes, you get what you pay for.

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Introduction To Investing

What is Investing?

Investing is, simply put, storing your money in a place that will help it grow. There are many different options when it comes to investing, from the stock market and retirement accounts, to real estate and any number of other avenues.

The main thing about it, is that it needs to be something that allows your money to earn you more money over time. Usually, it is done over a long time frame, like years or decades. Statistically, the stock market creates gains over time, and real estate appreciates (or becomes more valuable, so it can be sold for more money).

Generally, holding a lot of extra money in something like a shoebox, or a savings account, isn’t a great long term strategy. The reason being, that money won’t grow much. As inflation occurs, it could actually become worth less. Think of how much farther a dollar went 20 years ago, and you will see what I mean. You want your money to grow at a rate that overcomes inflation (which tends to be around 3%).

I won’t try to tell you which investment avenue is right for you. That involves a lot of different variables. A Financial Advisor could possibly help, and I encourage you to seek one out if you can’t choose on your own, or don’t want to.

What I will say, is the sooner you decide how to invest your money, the better. If you want to have money for retirement, it is important to start planning and saving for it now. Investment money grows over time, so the more time=the more money. Even if you are investing in a business, they take time to grow. So, learn, decide, and then, as Nike says, Just Do It!

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Best Ways To Make Your Money Grow

Ways to Make Your Money Grow

Disclaimer

First, I have to say that I am not a licensed Financial Advisor, and as such, I will not tell you specifically what you should invest in. I will tell you a little about what is out there, so you at least have an idea where to look if you find that you have extra money and want know the best way to grow your money.

No risk, Low Reward

The easiest and least risky place to put extra cash is in a savings account. Look for accounts that pay the most interest if this is the way you decide to go. Savings accounts have no risk, as the money you put in just stays there and earns a minimal amount of interest. It won’t make you rich, but it is accessible and safe.

Retirement Accounts and Compound Interest

If you are working and your company offers retirement savings accounts, this is another way to save. Typically, these are 401K or 403b accounts. The way they work is that you decide what percentage of your income before taxes are taken out you want to save, and the money comes out automatically each payday. The remaining amount in your paycheck is then taxed as usual. It isn’t tax-free, though, because whenever you later withdraw from the account, the money is taxed at your current tax rate. The idea is that you could be at a lower tax rate in the future when you are retired, and so you could potentially save in taxes. The money also grows over time, usually more than it would in a savings account. It goes into an account at whatever firm your employer has chosen, such as Fidelity or Lincoln Financial, and it is invested in a variety of different investments, like stocks, bonds, and mutual funds. The stock market has historically made more money than inflation alone, so the idea is that your money will grow over time by being invested in these accounts. They also grow due to the idea of compound interest. The way compound interest works is basically that each month the money you put in earns interest, and then the following month the money and the interest it earned both earn interest, and this process continues, multiplying your money over time. In the case of investing, compounding interest is a great way to gain money over time. It is also the reason large purchases bought with large loans end up costing way more than the original purchase. The money you borrow has interest added each month, which has interest the next month and so on. Compound interest is a double-edged sword, so using it in your investments is to your advantage.

One other advantage to workplace retirement accounts is that many companies offer what is called matching contributions. This means that for a certain percentage of your earnings that you invest, your company will put the same amount into that or another retirement account for you. For example, if a company offers a 4% matching contributions, that means if you put 4% of your income into a 401K, they will also put that same amount into an account for you to access at retirement. You can still contribute above that amount, but only the first 4% would be matched by your employer. It is free money, and a good rule of thumb is that if you are contributing to a workplace retirement account, you want to at least contribute enough to get the whole matching funds. If they offer 4% or 5% or whatever, you want to contribute at least that amount. This maximizes your free money.

There are limits to the amount of money that one can save in each type of retirement account, so be sure to look up and be aware of these limits. They change periodically, so you need to keep up to date.

Individual Retirement Accounts

For those earning money, but their employer doesn’t necessarily offer retirement accounts, there are also individual retirement accounts, or IRAs, including Traditional and Roth, that are opened in a brokerage by you. They are similar to 401K and 403b in that the money is put into an account and invested in a diverse portfolio designed to gain money over time. The difference is usually you have already paid the taxes on the amount you put in, so that money won’t be taxed again when you take it back out. You will pay taxes on whatever money is earned, however. You don’t need an employer as you can open these accounts on your own. There are multiple avenues to take to invest in these types of accounts, from automated low fee, to in person Financial Advisors in different companies. Always look at all your options and the fees versus the benefits before deciding which one might be right for you.

Other Ways to Invest

Beyond the traditional investments through employers and IRAs, there are almost endless other ways to invest money. They all come with their own set of risks and benefits. You could invest in real estate by buying rental properties, or just invest in a fund called an REIT or real estate investment trust that takes money from a bunch of investors like yourself and puts it into a bunch of different real estate transactions or even real estate stocks in order to hopefully gain interest and or dividends, which are bits of money each month from the overall earnings.

Step by Step Retirement Investing Guide with DiversyFund

You could use investment apps, like Stash or Acorn to put small amounts of your money into the stock market and watch how it performs. Starting your own business is investing in yourself. Doing a quick online search will show you a multitude of options. Do your research before choosing what suits you best. Most likely, you will want to invest your extra money somewhere, though, so you can take advantage of the compound interest that will grow your money over time.

The younger you are able to start, the better, since the longer the money is invested the longer it has to grow. Even small amounts invested regularly can grow to quite astonishing amounts over time. Starting when you are in your 20s vs yours 50s can literally mean hundreds of thousands of dollars difference.

Takeaways

Investing extra money can be a great way to really grow your cash over time. The younger you start, the more your money can potentially increase.

Compound interest can make your money into a snowball that gets bigger the longer it is invested. This works in reverse as well, as it can increase debts that are not paid down in a timely fashion.

Each investment avenue comes with its own set of risks and benefits. There may also be charges and fees. Always research any investment you are considering thoroughly before putting your money into anything. Seek the advice of a Financial Professional, such as a CPA or Financial Advisor if you aren’t sure.

For helpful products and services, visit my Resources page.

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What’s The Best Way to Pay Off Student Loans?

 

Big dreams, big debt

Many people who go to college do so with the help of student loans. I was one of those kids who couldn’t quite decide what I wanted to be when I grew up, and so I ended up spending many extra years in college, accruing massive student loan debt the whole time. At the time, I didn’t pay much attention to it, because it is not required to make payments on student loans while one is still in school. I sure did notice afterward, though, when the bills started coming in! I had multiple different loans from different companies, including both public and private loans. I had maxed out the amount of public or federal loans that I was able to get and had to get the rest in private loans, which came with even more hefty interest rates. The result was hundreds of dollars per month in bills 6 months after graduation.

Indecision will cost you

I have two bachelor’s degrees because the first one ended up being in a major that really didn’t have much in the way of job prospects without my having to go on to my Doctorate, which I could not do at the time. Unfortunately, I found this out after graduation. I started out paying the loans the best I could, which sometimes meant that I paid one but not another, or none at all. I got farther and farther behind, and because of interest my balances kept going up. My credit took a serious hit.

Taking a Break from Student Loan Payments Without Penalty

I finally went back to college for a degree that would lead to a well paying career, and in doing so was able to skip my loan payments for a while longer. This is called having your student loans deferred. I learned that if you contact the servicer of your loans, there are multiple different types of deferments. You can apply to have loans deferred for hardship for varying lengths of time. The main thing is to communicate with the lender/servicer before you are late or miss a payment. This will save your credit.

How To Refinance Student Debt

After I graduated the second time, I started paying my loans again. I also started doing a lot of research about how to lower my payments, because I felt like I was getting absolutely nowhere and drowning. I found out that I could consolidate my federal loans into one large loan with a fixed interest rate with only 1 payment. I immediately did so. It wasn’t hard, it just took some paperwork. I did some searching online for companies that offered student loan refinancing. At the time, there was really only one program with the federal government that did so. Nowadays there are multiple companies that offer student loan consolidation, so if you decide to go this route, shop around for the best interest rate and time frames. I then only had that payment and my payments for my private loans, because the government did not allow the combination of public and private loans. This still beatthe 6 payments I had before that because the consolidated payment was significantly less than the individual payments had been, and the interest rate was pretty low. One note about consolidation, and that is that if you consolidate loans it may make you ineligible for certain repayment programs offered by the government. One of those is the loan repayment for public service program, which is a way for people to get loans forgiven if they enter into certain professions. Always look into the details of loan repayment programs you may be interested in before consolidating, unless you cannot make the payments without doing so.

The Best Way To Pay Off Student Loans: The Stacked Loan Payment Payoff Method

Since I still had several loan payments, I wanted to pay them off in the most efficient way possible. I did so using a method called stacked pay off. This means that any time I had extra money I would send it to the loan with the highest interest rate first until that loan got paid off. Then, I would apply the amount of money I had been paying on that loan to the next loan in line each month. This drops the balance of the loans much faster than just paying the minimum payment on each one or just paying a little extra on each one. It is also quite satisfying to see loans being paid in full.

During college, I was fortunate enough to get married. My spouse, unfortunately, had almost as much loan debt as I did. We applied the same methods to paying them off, including consolidating them. We decided to maintain our frugal college lifestyle even after we were both working, and we applied all of my spouses income and any extra I made directly to our student loans in the stacked loan payoff method. The result was that we were able to pay off $136,000 in student loans in 7 years, with a combined income of about $80,000 per year.

Takeaways

Before even taking out any student loans, do your best to make a firm decision on what you want to accomplish in college. Taking extra classes or changing majors costs a lot of extra money.

Always communicate with your lenders before you miss any payments or get into financial trouble. Often they can help with deferments or other money saving options.

If at all possible, pay extra each month to decrease the amount of interest you pay on the loans.

Consider consolidation, if you have multiple loans with multiple payments and the payments cause a strain on you.

If you still have multiple loans or debts, using the stacked loan payment method can save time and money by paying the loans with the highest interest first and then applying the payments for each paid off loan to the next loan in line.

It will take time, but you can and you will one day be debt free. In the meantime, there are ways to make obligation feel less overwhelming and more manageable.

For helpful products and services, visit my Resources page.

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Just Starting Out: All About Checking and Savings Accounts

Savings Accounts Are Not All the Same

One of the first steps I took on my financial journey, just after getting my first job, was to open a savings account. At the time, a person had to be 18 to have a checking account, and I was only 16. My savings account was really just a place to put my money that made me feel slightly more grown up than putting it in a piggy bank or under my mattress. It did come with an ATM card, though, so I felt very grown-up every time I opened my wallet and saw it there. I was allowed to take out money up to 6 times per month, which was plenty, considering I was only making $3.75 per hour and the ATMs made you take out $20 at a time.

Had I known anything at all about money, I would have shopped around for a high-interest rate savings account at least. The one I had earned something along the lines of 0.01% interest, which is pennies. These days, a high interest savings account, such as the one at Marcus.com earns about 1% interest. Not much, but still much better than a regular savings. It is always a good idea to shop around for the best rates, but when doing so make sure to watch out for any fees or introductory offers that expire after a short period.

Speaking of fees: Beware of Bouncing Money that Multiplies and Destroys

Once I was old enough to open a checking account, I immediately did so. I wanted to be able to write checks and have an actual debit card. The difference between a debit card and just an ATM card linked to my old savings account was huge. It meant that I could make a purchase with just a swipe and a signature (if it had the Visa or MasterCard logo on it), or just a pin code. The money immediately came out of my account. It was like magic!

The problem was, even though the money came out immediately every time I made a purchase, and I diligently kept track of every one like I was supposed to do and subtracted it from my balance, I didn’t account for little hidden fees. So, one day, I made an ATM withdrawal and took out the last $20 in my account. I had something like 20cents remaining. There was no minimum balance requirement (another thing to know before opening an account). I thought I was fine. Turns out, that ATM had a $0.50 fee for every transaction. When that fee was charged, my account became overdrawn, meaning I had accidentally taken out more than I had in the account. To make matters worse, there were a couple checks I had written that I didn’t think people would cash right away that went through before I had time to get to the bank to deposit more money. What followed was a snowballing disaster! The bank charged me $25 for each transaction that didn’t have the funds covered in the account, including the initial $0.50 cent ATM fee. I ended up being charged $75 in fees, plus the amount of the outstanding checks. I was in deep!

Luckily, I had the money within a few days, so I went to the bank to pay my debt, embarrassed and humiliated. I thought that would be the end of it, with a lesson learned to watch for fees. The bank, however, informed me that I had to pay the money, but they were also closing the account and had reported me to Check Systems. Check Systems was the entity that people saw on your credit report when you overdrew accounts, and it made a person into a very bad credit risk. The worst part was it lasted for 7 years. During that time, it was next to impossible to open another checking account, as most banks would see that on my credit and deny a new account. It was only several years later that an all online bank finally took a chance on me and let me open an account. I had to send them money through the mail. Scary! And I had to wait days for it to show up in the account. I knew I had to do it, though, in order to rebuild my checking account reliability and my credit.

Points to Remember

When it comes to savings accounts, shop around for one that will pay you the most interest on your money. That is free money, and it is always a good thing.

Always find out about any fees associated with an account or even with a transaction before you open accounts or perform a transaction. A little mistake with a checking account can hurt you for many years.

If there is a service called Overdraft Protection offered for your checking account, it is worth it to have it. This may have saved me a lot of money and years of strife. It is basically a little insurance plan saying they won’t immediately charge you and/or close your account if you take out more than you have, as long as you pay it back in a specified time frame.

For helpful products and services, visit my Resources page.

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How to Save Money

Saving Money: What’s That?

Many people don’t think about saving money at all, or feel like they don’t make enough to be able to save. The truth is, when it comes to saving money, even a little bit counts. Just like investing, starting early, and doing it regularly can really add up over time and make a big difference in the long run. There are a lot of ways to save a little bit, and if you do so regularly, you could end up with a nice amount in your savings account. The following article discusses how to save money, even if you aren’t making a ton if it.

Trimming the Spending

The first way to save is: don’t spend. When you think of each purchase before you make it, ask yourself if you really need it, or if it will really increase your happiness for more than the short term. Is it a cup of coffee that is way overpriced, and you could make one at home for a fraction? Is it a subscription service you have had for a long time, but rarely use, or could give up without really missing? Do you need all those premium channels, or would a smaller subscription to Hulu or Netflix work just fine for your TV fix?

Try not to give in to fads. Just because the newest iPhone has come out doesn’t mean you have to have it. Is your phone working just fine? How about your watch? If so, reconsider upgrading or buying an Apple Watch or other such items that cost a lot of money. Most cell phones are smart phones these days, and the high price tag on some brands just doesn’t seem justifiable in most cases.

Shop Around

Have you shopped around and found the best price? Many times, you can save a lot of money on necessary purchases by checking out more than one vendor. Take car insurance-they say that you should be shopping around for car insurance every 6 months to make sure you are getting the best deal. Doing so could potentially save you hundreds of dollars. There are even services out there to do it for you. Buying brand names rarely pays for itself these days, as most things are made with the same cheap parts, so look for the generic version first. If you try it and do not like it, or find it is actually not as well made, then buy brand name the next time (if there is one). Most of the time you will find the generic to be just fine, at least for small ticket items. If you are buying larger items, do your research to find out which brand is best and buy that one, in hopes that it will be a one time purchase.

Saving a Little Each Time Means Saving a Lot Over Time

Regularly putting aside a small part of your income, before you spend anything, can add up to a lot of money over time. If you do it consistently, and always before you see the rest of your paycheck, you will never really miss it. For retirement, this can be in the way of a workplace 401k or 403b (which you should be participating in if it is offered, at least enough to meet the company match, if there is one), or an IRA if your workplace doesn’t offer it. Set it up so there is an automatic withdrawal each payday. You should also be aiming for an emergency fund that covers at least 3-6 months of expenses, ideally. Putting this money into a Money Market or High Yield savings account where it can be accessed if needed, but earns a little more interest than your regular savings account is a good idea. You don’t have to put in a lot from each paycheck, but a little each time will add up, and you will be grateful for it if and when you need it.

Money Pits

Try not to eat out very often. Restaurants are expensive. They have to cover a lot of overhead to serve you the same food you could make at home for a fraction of the price, and have leftovers. Try setting a goal to eat out rarely, be it once a month, or whatever is realistic for you. Then, make your own meals at home, and resolve to eat your leftovers. Wasting food is dumping money in the trash. Watch how fast your savings will grow if you put the money you would have spent in restaurants straight into your savings account. You will be amazed! The same goes for planning your meals ahead of time, and then going into the grocery store with a list and a plan. You will save money by not buying extra items each time you go in, and perhaps being able to use some of the ingredients for multiple meals.

If you haven’t set up a budget so you can see where your money is going, make a goal to do so as soon as possible. Knowing where your money is going is the first step to saving. Then, pick the category of spending that is the highest, not counting bare necessities like mortgage and regular groceries, utliites, etc. See if there is any way to trim from that category, like the restaurants example above. For us, the money pits are almost always eating out or shopping at Walmart. If we go into WalMart without a list and the willpower to stick with that list, we will always spend way more than we plan.  Making a list ahead of time is a tool we use to hold ourselves accountable.

Take Aways

Saving money doesn’t have to be hard. Making thoughtful purchase decisions and committing to setting up automatic savings will both go a long way toward having money when you really need it. Always shop around for the best price, and don’t throw money in the trash by wasting what you have bought, either by buying one time use things you didn’t need, or not eating leftover food you already made.

For helpful products and services, visit my Resources page.