Tag Archives: debt

The Ten Commandments of Financial Common Sense

Most everyone knows you need to budget, balance and save. However, here’s a list of the ten steps to ensure you walk on stable financial ground.

  1. Set a budget and stick to it – Make financial goals and then create a budget that supports those goals. Account for expenses on a monthly basis and set budget limits for dinner out and other forms of entertainment.
  2. Pay off all debt (except a home mortgage) – Make debt payments a part of your budget until paid off.
  3. Set aside money for future expenses – Plan in advance for both short- and long-term big expenses and create a line item for them in your monthly budget.
  4. Save for emergencies – Set aside funds each month to build a reserve of three months living expenses (eventually build up to six) to guard against job loss or unexpected expenses. Having these savings automatically deducted you’re your income makes it easier.
  5. Take advantage of available plans – Company-sponsored 401(k) plans and/or other retirement plans, 529 savings plans and education funds will help you financially later. A little put away today can mean a lot is available tomorrow.
  6. Spend only what you have – Limit uses of credit vehicles like credit cards and high interest cash advances. Pay off credit cards by due dates each month.
  7. Manage your financial life – Regularly manage and monitor your accounts and statements, including balancing your debit/checking account and investment accounts.
  8. Keep an eye on your credit score – Making timely payments is one of the best ways to maintain good credit for future lending. If used responsibly, automatic payment systems like online banking can be beneficial.
  9. Set up Identity Theft Protection on your financial accounts – Regularly change your online and mobile passwords, and safeguard your financial statements.
  10. Openly communicate with your spouse about your family’s financial position – Make sure you both agree on short- and long-term goals. Teach your children the power of saving and budgeting to put them on the path to a successful financial future.

Ideas to Manage the Burden of Student Debt

Each year a new crop of graduating high school seniors begin their collegiate careers while college graduates consider the opportunities that graduate school provides. As a result, the mountain of student debt continues to build. While this debt is unavoidable, here are some ideas to help make that mountain a little less insurmountable.

Know the note – Not all student debt is created equal. Understanding the terms of all your student loans is important. With this knowledge, select the correct loan option and know which loan to pay first. Things you should know about each loan include:

  • The interest rate
  • The term of the loan
  • Amount of any up-front fees
  • Pre-payment penalties (if any)
  • When interest and payments start
  • Payment amounts
  • Payment flexibility
  • How interest is calculated

Suggestion: Create a spreadsheet with a student loan in each column. Then note the variables from this list under each note. It will create a strong visual of your student loan situation.

Pay the interest – Some student loans accrue interest while you are in school. With the compounding of this interest, your student loan amount continues to grow with each passing year before repayment begins. Banks love this. You should not.

Suggestion: Figure out how to make the interest payments while in school. This will not only lock the amount you owe, it will reduce the amount of interest payments you will be paying on your interest.

Pay a little extra in the early days – The math of loans benefits banks in the early years of the note. This is because the vast majority of interest is paid by you in the first years of repayment. The last year of your loan repayment is primarily principal payments.

Suggestion: Pay extra every month as soon as payments start. While this seems impossible as you enter the workforce, even $10 extra a month can dramatically reduce the amount of total payments you make over the life of your loan.

 While student debt is an unavoidable outcome of getting a great education, it can be minimized if actively managed. Remember small changes can yield results if planned for in advance.

Financial Skills Every Parent Needs to Teach Their Child – Part 1

In the race to get our kids through high school and on to life beyond, I’ve seen a breakdown in the education system to explain basic financial skills.  Here’s the first half of a list of essential economic concepts that every high school student should understand.

How bank accounts work – Provide your child with a basic understanding of checking and savings accounts. Show them how to use checks and debit cards to pay for goods. Teach them how to access their accounts and reconcile their statements each month.

How credit cards work – Help your child understand that credit card spending actually creates a loan. Emphasize the importance of not carrying a balance by paying off credit card debt each month.

Tax basics – Prepare your child to anticipate taxes on not just purchases but on their wages as well.  Assist them to fill out their first W-4 and explain how it will affect their paycheck. When your child receives their first paycheck, walk them through their paystub to explain Social Security, Medicare, and federal and state tax withholdings.

The power of a retirement account – It might seem a little early for this, and it’s a hard concept for a young person to grasp, but explain to them the advantages of long-term savings tools like a Roth IRA.

How credit scores work – While no one but a credit reporting service actually understands all the aspects that go into creating a credit score, it’s still important to teach your child what can impact their credit and how that can affect their ability to get a car or house loan in the future. Everyone has access to a free credit report each year. Walk your child through their report.

Spending within your means – Save then spend.  This is a simple concept that is hard to accomplish. By teaching your child good habits early, you give your child a stable financial foundation for the future.

The art of saving – Part of spending within your means and saving go hand-in-hand. Teach your child healthy savings habits. Perhaps it’s setting up a separate savings account, setting aside a set amount each month or even a percentage of what they earn.

Look for the second part of this article next week!

Protect Yourself from Identity Theft and Fraud

Imagine this – you’ve given us all your documents early, we’ve prepped and processed your tax return, you’ve reviewed it and signed the eFile forms… then we call you and advise you that your tax return rejected eFiling because someone has already filed using your social security number! Sadly, this can happen if you become one of the growing number of victims of tax return identity theft. At least one estimate shows tax-related identity theft cases have increased 650% since 2008. Identity theft can delay your tax refund, but other consequences could be credit card debt or loans taken out in your name.

To avoid becoming a victim, we recommend the following:

  • Safeguard your social security number and other financial information. Don’t send financial documents via email unless you use an encryption program. To send documents to us, use our LeapFile application to securely send us documentation.
  • Check your bank and credit card transactions regularly and monitor your credit ratings.
  • Don’t give out your information on the phone, even if the caller identifies themselves as an agent of the IRS or other authorities.