Monday, August 11, 2014

Six Years of Car Payments Sounds Like A Student Loan

I just saw a TV commercial where they were offering 0% financing on a new car for 72 months; that's right - six years. The rule of thumb is to never finance a car for more than three years or 36 months and keep the car for at least six years. If you do that and then continue the amount of the car payment into your savings account for three or four more years, you will be able to pay cash for your next car.

We all know that money is not free, so if there is cash back offer or 0%, pay cash and take the discount.

I don't know about you, but ten years to pay off my student loans seemed to take forever. I personally couldn't stand for paying for a car over a six year period.

The problem with debt is that you are pledging future earning to the banker. In simple terms, you are enslaved to your lender. Vehicles depreciate over time –a vehicle is not an investment. At least with your student loans, it's an investment that pays off.

When you are debt free, all the money you make is for you (and the government in taxes). Being free of debt liberates you to pursue your passions and work for less doing something you love.   When you can turn your passions into profit, you never have to "work" a day in your life.

Be careful of low monthly payments. Dave Ramsey says "poor people ask how much down and how much a month. Rich people just ask how much."  Here it to you becoming rich and debt free.

Friday, August 1, 2014

Student Loan Repayment – Know Your Options

For the May graduates, 6 months from graduation is time to start repaying your student loans.  The Federal government wants its money back and provides many options for repayment.

First question you need to ask yourself: “Should I consolidate my student loans?
·        PRO: Consolidated loans simplifies your loan repayment by centralizing your loans into one bill, providing one payment, and can lower your monthly payment by providing you up to 30 year to repay your student loans. 

·        CON: You may lose any benefits offered with the original loan.  Once you combine your loans into a Direct Consolidation Loan, it’s a done deal and they cannot be unconsolidated.
After you decide if you are going to consolidate your loans or not, you need to choose a repayment plan.

The Federal Student Aid provides all the information you need to know for Federal Student Aid, Work-Study jobs and grants. Listed below is an overview of Direct Loan and FFEL (Federal Family education Loan) Program Loans repayment plans, noting information regarding repayments, deferments and forbearance. 
There are many companies out there who want to take your money to enroll you in government plans that you could do yourself.  Take caution of offers that seem “too good to be true” --because they probably are.

Overview of Direct Loan and FFEL (Federal Family education Loan) Program Loans Repayment Plans
Repayment Plan
Eligible Loans
Monthly Payments and Time Frames
Quick Comparison
Direct subsidized and unsubsidized loans
 
Subsidized and Unsubsidized Federal Stafford Loans
 
All PLUS loans
Payments are a fixed amount of at least $50 per month.
 
Up to 10 years
 
You will pay off your loan in a shorter amount of time and you will pay less interest, however your payments could be higher.
 
Consider this plan if you can afford higher payments
Direct subsidized and unsubsidized loans
 
Subsidized and Unsubsidized Federal Stafford Loans
 
All PLUS loans
Payments are lower at first and then increase, usually ever two years.
 
Up to 10 years
You will pay more for your loans over time than under the 10 year plan.
 
Consider this plan if you expect your income to start off low and then grow over time.
Direct subsidized and unsubsidized loans
 
Subsidized and Unsubsidized Federal Stafford Loans
 
All PLUS loans
Payments may be fixed or graduated.
 
Up to 25 years
Your monthly payments would be lower than the 10-year standard plan
 
Must have at least $30,000 in outstanding Direct Loans OR $30,000 in FFEL Program loans.
 
Direct Loans and FFEL loans must remain separate.  You cannot combine Direct Loans and FFEL loans to reach the $30,000 threshold.
 
Must be a “new borrower” as of October 7, 1998
 
You will pay more interest over a longer period of time than the 10-year plan.
 
Consider if you have over $30,000 in qualified loans and cannot afford the 10-year or graduated repayment plans
Direct subsidized and unsubsidized loans
 
Subsidized and Unsubsidized Federal Stafford Loans
 
All PLUS loans made to students
 
Consolidation Loans (Direct or FFEL) that do not include Direct or FFEL PLUS loans made to parents
Your maximum monthly payments will be 15 percent of discretionary income, the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply).
 
Your payments change as your income changes.
 
Up to 25 years
 
You must have a partial financial hardship
 
Your monthly payment  will be lower than payments under the 10-year standard plan
 
You will pay more for your loan over time than  under the 10-year standard plan
 
If you have not repaid your loan in full after making the equivalent of 25 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven
 
You may have to pay income tax on any amount that is forgiven.
Direct subsidized and unsubsidized loans
 
Subsidized and Unsubsidized Federal Stafford Loans
 
All PLUS loans made to students
 
Consolidation Loans (Direct or FFEL) that do not include Direct or FFEL PLUS loans made to parents
Your maximum monthly payments will be 10 percent of discretionary income; the difference between your adjusted gross income and 150 percent of the poverty guideline for your family size and state of residence (other conditions apply).
 
Your payments change as your income changes.
 
Up to 20 years
You must be a new borrower on or after Oct. 1, 2007, and must have received a disbursement of a Direct Loan on or after Oct. 1, 2011.
 
You must have a partial financial hardship.
 
Your monthly payment  will be lower than payments under the 10-year standard plan
 
You will pay more for your loan over time than  under the 10-year standard plan
 
If you have not repaid your loan in full after making the equivalent of 20 years of qualifying monthly payments, any outstanding balance on your loan will be forgiven
 
You may have to pay income tax on any amount that is forgiven.
 
Direct Subsidized and Unsubsidized Loans
 
Direct PLUS Loans made to students
 
Direct Consolidation Loans
Payments are calculated each year and are based on your adjusted gross income, family size, and the total amount of your Direct Loans.
 
Your payments change as your income changes.
 
Up to 25 year
 
You'll pay more for your loan over time than under the 10-year standard plan.
 
If you do not repay your loan after making the equivalent of 25 years of qualifying monthly payments, the unpaid portion will be forgiven.
 
You may have to pay income tax on the amount that is forgiven.
Direct Subsidized and Unsubsidized Federal Stafford  Loans
 
FFEL PLUS Loans
 
FFEL Consolidation Loans
Your monthly payment is based on annual income.
 
Your payments change as your income changes.
 
Up to 10 years
You'll pay more for your loan over time than you would under the 10-year standard plan.
 
Each lender's formula for determining the monthly payment amount under this plan can vary.
 

Wednesday, June 11, 2014

Summer Savings

The garden is in and we are beginning to harvest the fruit (and vegetables) of our labor.  With this in mind, I got thinking about the benefits of a home garden.  You can do this even if you live in an apartment, using container gardens, or a small raised bed.  We are fortunate that we have the space for a big garden and even a coop for free reign chickens who provide us with fresh eggs.
With a little bit of time you can save big at the grocery store by planting what you eat.  Tomatoes are easy to grow and one to three plants will feed a family all summer. Leaf Lettuce and Swiss Chard will grow continuously till frost. If you have more than you can keep up with,  you can freeze or can to save them for winter.
Lettuce, beets, spinach and Swiss chard are now being harvested and it makes for great salads. We will be able to put in a second planting so we have these vegetables fresh going into fall.

Besides the fresh vegetables, other benefits include:
Ø  You save money by less shopping at the grocery store
Ø  You eat better with higher quality fresh vegetables
Ø  You have time to enjoy working in the garden and harvesting what you planted
Ø  You may loose weight because you are exercising more and eating better
Ø  You have a stress release from your busy workday.

To see what we are up to, check out our other blog:  https://walkerhomesteadcsa.blogspot.com

Happy savings, gardening, eating well, stress reducing, being healthy and happy.

Sunday, May 25, 2014

Commencement Address

As we just graduated our senior class and sent them off into the world, a few parting words of advice and personal finance tips:

1.  Stay true to your values.  Roy Disney, Walt's brother said "When values are clear, decisions are easy."  Keep refining and defining your values, for they should guide your decision in the future.

2.  Go forth in your life with passion.  Stay true to your values and whatever you do, do it with passion and energy.  We all will have parts of our jobs that we do not like, but need to get done.  Use your passion and energy even when you have to "shovel out the stables."  It will make it more fun and just maybe a little more enjoyable.

3.  Love what you do and do what you love.  It may take you 5, 10, 20 or 50 years to find your true calling in life, but enjoy the journey.  You will learn something in everything you do, but may not realize it until you look back on your life.  Your life's journey has a purpose and the journey is the way to learn and discover your purpose.

4.  ALWAYS pay yourself first. Make sure you put enough in your 401-k to get your employer’s entire match.  You are responsible for your own retirement, so start early and maximize your contributions.

5.  Don't buy things you cannot afford.  It is tempting to rent a nice apartment and fill it with nice furniture....all purchased on credit, but do not give into this temptation.  Save and pay cash for the things you want and need.  You are used to living on very little as a college student.  Keep that going for a few more years and save for the things you want and PAY CASH, not credit.

6.  Remember to give back and be thankful.  It took a village to get you through college: your family, friends, teachers, professors, co-works.  Keep them in mind as you do good with your education.  Perhaps you will influence others to go to college and graduate.  Always give back to others.

7.  Keep in balance with your saving, spending, investing and giving.  Only you can control what you do with your money.  Live life fully and enjoy the relationships you make, but keep everything in balance.  Don't sacrifice friendships for career or your career for friendships, and don't sacrifice your savings and investment plans for immediate gratification.  Life is short so enjoy it as you keep your balancing point.

Thursday, May 15, 2014

Personal Finance and Passion

My passion is farming and people and writing and creating. This month, we ventured into a dream of mine; starting the Walker Homestead CSA (Community Supported Agriculture). Bob will remind me that this is a business and we need to be making money at it. And I remind him that this is a passion and we need to be having fun with it; creating, experimenting, and sharing the goods and trials with our new extended CSA family. That in itself has a lot of value, and I would argue much more than a pile of money for which to select an investment option.
 
Yes, I could make much more on an hourly basis, exercising some of my other learned skills, but I earn so to keep me and my family secure and happy and so that so I can do things I want to do. Starting up a CSA -planning the events, sharing ideas between members, creating the gardens and the orchards and working with hens, thinking about milk goats (and maybe a few piglets) is joyful. And at the same time, we are earning money and reducing some of our tax liabilities.
 
Which speaks to the principle: If you find an occupation that you love, you will never have to ‘work’ a day of your life. It is graduation time. Good luck to all seniors in pursuit of your passion.

Sunday, April 6, 2014

Frugal While Waiting for Fitness

I have been injured, busy, on travel and a thousand other reasons for not staying fit.

Ramification: Weight gain. Temporary of course, but there is nothing worse than busting your budget buying clothing for a size you don’t want to stick with.

Short-term solution: A quick remake. I had a jacket to a nice suit which still fit but it has been a stretch since I have been able to shimmy into the skirt. I took two non-fitters from the back of my closet and made one fun skirt with attitude. Three hours later and I have a fun new addition to my wardrobe with attitude.

Cost: $0.00 Very frugal while working on getting fit. 



Thursday, April 3, 2014

The Envelope Observation

We made it. For fun, we spent the last month going back to using the envelope system to help stay on budget. The theory is that having a personal relationship with each dollar spent increases the likelihood that you will not pithier it away.

I had been in the habit of charging at least three coffees a day against my next month’s payroll check. Running between meetings, it easy to have the barista swipe my staff ID badge to keep caffeinated. This habit comes to $8.00/day or $160.00/month or $1,920/year.  Think of what I could do with an extra $2,000?

Having to draw the dollar bills out of my envelope and slide them across the counter was much more painful than I thought it would be. Many times, my previous cup of coffee was not yet empty, just cold. For two bucks, I’m ok with nuking it for 30 seconds.  When drawing your spending money out of an envelope, there is much more a sense that money is a finite resource, not an endless stream. It now feels very irresponsible to throw out cold coffee.



Waste not. Want not. Thank you envelope.