How to Be a Financial Grownup. Bobbi RebellЧитать онлайн книгу.
at a private college in New York, is laser-focused on paying down her student debt. The total cost of the program was more than $200,000. But she went into the process with her eyes open and made a conscious decision that this program would give her the right education to get a job when she graduated.
She started the process in high school by getting as many scholarships as possible. She received about $16,000 a year. She also knew she could count on some help from her parents. They paid as much as they could while she was in school. But they told her at the start that once she graduated, and her younger sister started college, their resources would shift, and she would be responsible for the rest of the debt.
Sara now has both a degree and the debt to go with it. A whopping $100,000.
The good news: her educational bet paid off and she got a great job, in her field, right away. After working at a day camp in the summer, she has started her new job teaching math to middle-school students. She’s living at home and will put just about every penny she earns toward paying off her debt. She’s also calculating the best way to pay, fully aware that there are different payment plan options and timetables that offer varying interest rates. Her lesson to young people: read the paperwork. There can be a lot of ways to save, even in the debt-repayment stage.
Student Debt Payoff Tips
Use direct deposit. Most lenders will shave about 0.25 percent off the interest rate if you do. Statistics show lenders that if the money comes to them automatically, it’s more likely to get paid. Over the life of the loan that could save hundreds, even thousands, of dollars in interest rate payments.
Consolidate your loans. Sometimes lenders will bundle them all together. Not only does this make it easier to track everything, but you can often get a lower rate. Be sure to ask them to factor in a history of on-time payments as well as a good credit score.
Pay more often. Try paying every two weeks instead of once a month. You’ll pay the equivalent of 13 months a year and knock down the total faster. By the way, this works with other debt, such as mortgages, as well!
Open Secret: Student Debt Can Sometimes Be Forgiven
Certified Financial Planner Cary Carbonaro, author of The Money Queen’s Guide, shares a great new way to battle student debt. It’s called Public Service Loan Forgiveness (PSLF). If you work in a public service job, your federal student loans may be at least partially forgiven after ten years. You have to be working full time in an eligible public service or nonprofit job, and you have to have made on-time payments. And it only applies to certain types of federal loans. But the Consumer Finance Protection Bureau (CFPB) has said that about a quarter of U.S. workers could be eligible. Jobs include teachers, social workers, and many non-profit workers, as well as those at government agencies and groups such as the Peace Corp. It’s worth investigating.
Take a Close Look at Your Benefits
Companies are starting to offer to help young employees pay off their student debt. For example, PwC recently started offering its lower-level employees $1,200 a year to help pay down student debt. The benefit is good for six years and can help pay down a significant portion of the loan. One young employee I spoke with, Gabriella, was happy enough to have yoga and a gym. But with $30,000 in debt, the student loan perk was much more important.
As of now only about 3 percent of companies are offering this perk, according to the Society for Human Resource Management (SHRM), but as the job market tightens, it’s likely to become an attractive way to entice young people who aren’t all that impressed with ping pong tables and free food.
Leverage Online Tools
One of the many great things about the United States of America is that every problem seems to bring a wave of entrepreneurs looking to solve it. There are quite a few new websites popping up to help companies and their employees manage the repayment of student debt. Both Student Loan Hero and Flex395 owner Tuition.io have tools to help manage student debt, including ways to analyze the costs and benefits of different payment strategies. These can be valuable tools to help you stay on top of debt and informed about new ways to pay it off.
Up Your Income with a Side Hustle
The more you can earn, of course, the faster you can pay down debt. If you have the time, consider a side hustle. It’s basically another job in addition to your primary source of income. It can be a way to earn more, gain new skills, or fulfill a creative interest. We’ll talk more about it in the next chapter. Side hustles can be a great way to earn extra cash to help you knock out your student debt so you can get it over and done with.
This may seem obvious, but I’ll mention it anyway – avoid taking on additional debt, which could distract you from paying down your student debt. That will likely mean putting off some purchases you want to make, even if retailers offer attractive financing. It may even be zero interest, but don’t buy anything new if it means monthly payments.
Take a quick look on Craigslist. Find an item that isn’t selling and ask if you can have it for free if no one buys it soon. Chat up the seller via email. Find out as much as you can. If it’s a moving sale or they’re redecorating and need the item out as soon as possible, tell them you will come and pick it up whenever they want. It may sound too good to be true, but it happens more often that you would believe.
On that note, someone you know is always redecorating or moving. Ask around. You’d be surprised how many people will be thrilled to give you something, especially furniture and old televisions, if you just come pick it up.
Which brings us to our next Role Model, legendary investor Elliot Weissbluth, and how he made a tough decision to say no to one of those no-money-down temptations when he was a young graduate.
• FOUNDER AND CEO, HIGHTOWER
MY FINANCIAL GROWNUP MOMENT
The summer after my freshman year of college I decided to buy a car. I walked into a dealership and learned that I had the option of financing one of their shiny new models by borrowing more money than I’d ever had in my life: no money down, just sign on the dotted line.
Tempted but skeptical, I looked at the interest rates and did some quick math. Yes, I could drive off the lot in a brand new car today and pay zero dollars out of my pocket. But the true, total cost of the payments and interest on the loan would have bought me two new cars on the spot. I turned around, walked out of the dealership, and bought a used Jeep instead – in cash. The Jeep needed a lot of work, but I realized I’d rather roll up my sleeves than rack up the debt.
MY LESSON TO SHARE
Using credit or loans to buy something you can’t afford doesn’t change the fact that you can’t afford it. It only makes sense when the purchase delivers a return on your investment to offset the cost of the debt – like a home that will increase in value over time or an education that will boost your future earning power. Cars, on the other hand, start to lose value as soon as you drive them off the dealer’s lot.
With a little elbow grease, my junker of a Jeep got me where I needed to go. More importantly, it steered me away from taking on an expensive debt burden early in my financial adulthood. Last but not least, that old Jeep introduced me to a new passion: to this day I still love to tinker under the hood of a car.
WHAT TO CONSIDER IN BUYING A CAR
ELLIOT’S PASSION FOR tinkering with cars is a great hobby. And it kept him out of the kind of trouble Heather Thomson faced early on. He thought about his priorities and his true needs. He also did not get emotional. We’ve all heard stories about people going in to buy a practical sedan and driving off the dealer’s lot with a fancy sportscar. Clearly, you need to pay attention to what’s really important