The Surprise Costs of Senior Year of High School

May 16, 2017

I was recently talking to a friend of mine whose son is about to graduate from high school and she was telling me how expensive it is to have a senior and how she wishes she would have started planning earlier for all of the money she had to fork out. Below are some of the things she wished she would have saved for:

College Entrance Exam fees: Most people forget to factor in the cost of college entrance exams. The SAT with the essay is $57, although the fee may be waived depending on your income. The ACT with writing costs $58.50. Similar to the SAT, the ACT can waive fees for low income students.

College entrance exam study programs: Initially, my friend used free programs like the ones at KhanAcademy.org and her local library to help her son prep for the college entrance exams. He ended up needing a combination of online and classroom style learning, so she also enrolled him in a college exam prep program, which can easily cost over $1,000. She suggests working with your child’s school counselor to research and review different tutorial programs to find the best one to fit your child’s need and your budget. She also suggests outright asking for discounts and combing websites like Groupon and Living Social to look for discounted college prep tutoring.

College Application Fees: The average college application fee in 2016 was $42. Her son applied to six colleges so the costs added up quickly. Although my friend did not qualify, you may be able have application fees waived based on income, applying online, being an alumni, or visiting the college. She suggests you and your child talk to the school counselor early about ways to save on college application fees.

High School Tchotchke: My friend was blindsided by all the things that came up “senior.” Senior mugs, flags and tee-shirts were a few of the items her son wanted. Then she got hit again with senior pictures, yearbook, varsity jackets and the class ring. The yearbook and pictures alone can climb into the hundreds of dollars. Give your child a budget as to what he can spend.

High school events: Senior trips, college visits, graduation parties, prom, post graduation parties and the wardrobe to attend the events can easily add up to over $1,000. She had to give her son a reality check that he could not rent a helicopter for prom. She suggested saving in advance and talking to your child about your budget and start shopping early for clothes. She rented a tux for her son’s prom but his date also rented her dress. Her son and his date went to a beauty college instead of a salon to cut his hair and style hers. A little researching and planning can save hundreds of dollars.

If you’re planning now for your child to head into senior year, use checklists like the one from Consumerist.com to estimate costs and start saving monthly. If your child is planning to work over the summer, have them contribute by saving part of their income to cover expenses. This may mean opening up a savings account and having part of your child’s paycheck automatically deposited into the savings account. Ultimately, the more planning you do and the more dialogue you have with your children about how much they can spend, the better you can manage the senior year dollar drain.

How Your Kids Can Avoid Summer Brain Drain

May 09, 2017

I can’t believe it’s May already. Like many parents, I start planning for the summer as the school year starts to wind down. Working from home, I tried to let my kids stay home for a few weeks last summer. After a week of fights with Barbie dolls as the weapon of choice, meltdowns in the middle of my conference calls, and almost being decapitated during a spontaneous pillow fight, I gave up and started looking ways to survive my kids being out of school for the summer.

I wanted to prevent the “summer brain drain” when kids can lose over two month of learning over the summer, so I focused on reading programs. Local libraries have excellent free summer reading programs and companies such as Barnes and Nobles, Half Price Books, and even TD Bank offer reading programs as well. The Balance has a great list of summer reading programs that they are currently updating for 2017. Contact your local bookstores and consider using it to find free local programs in your areas.

Some schools offers summer academies, which offer programs for students from struggling to gifted. Depending on your school system, the programs may go from elementary to high school. Even better, the programs last a full school day and may be free.

For those of your who may want a more focused reading/academic program, check out your local college for summer reading programs. Some of these programs that go from entering kindergarteners to 12^th graders. They are typically conducted once a week for about 2 hours with a reading assignment to complete between classes. Learning Centers such as Sylvan Tutoring, Huntington Learning Center, Kumon offer comprehensive summer programs and others, such as Mathnasium, focus on math.

Summer reading/academic programs are one of the easiest ways to distract your kids in the summer. Depending on your budget, you can find everything from simple programs at little to no costs to more comprehensive programs. Finding one for your kids can help them start off their new grade a step ahead of the other students and help you preserve your sanity during the summer months.

How to Manage Money in a Financial Crisis

April 25, 2017

Murphy’s Law is that anything that can go wrong will go wrong. I used to laugh when I heard this until Murphy and his entire family decided to park themselves in my life. In about a 3 month period, we experienced a dramatic drop in income, had a head-on collision and wrecked our other car. (If you read my other posts, Murphy seems to sit on top of our cars).

The accident sent me to the ER and resulted in weeks of physical therapy. Our heating and air systems went out in our homes a few weeks later. It seemed like there was a permanent rain cloud over our family that we could not get out of – but we did. It was not easy, but the steps we took early in the process made everything smoother.

Accept our new reality. As crazy as it sounds, the first step was accepting that our finances had changed. Even after the drop in income, we still spent as if we had our full salaries. This just got us deeper into debt.

Create a budget based on our new income with a focus on the essentials. As we started filling in budget categories, we first focused on the categories that were essential – food, shelter and transportation. Next, we focused on the things that we considered important but would not cause us to be homeless, starving or jobless –Internet service (if your work from home, ask about being reimbursed for Internet services), cell phones, credit card bills, student loans, etc. At the bottom was entertainment, travel, and eating out.

Contact our creditors BEFORE we had problems paying our bills. I cannot overstate that the most important thing to do during a crisis is to communicate. Talking to our creditors – the mortgage, student loan and credit card companies – created a record.

I learned later that the record was two folds. One is that we stated we had a crisis in advance and the second is that we are committed to paying our bills on time and will work with our creditors. You will also know which department to call and the process for getting help if you cannot pay.

Eventually, we got to a point where we could not pay all of our bills. When we called, we knew to call the hardship department, state our situation, explain our budget and ask for help. We were able to get help from all the creditors we contacted. If you are facing a financial crisis, even if can currently pay your bills, consider contacting your creditors to inform them of your circumstances. We learned the earlier you contact them, the more likely they are to work with you.

Start slashing our expenses. I will admit, drastically reducing our expenses felt like the Band-Aid dilemma of our childhoods. Do we take it off quickly or slowly? No matter what you choose, it will hurt so just do it quickly.

The same goes with expenses. Just start slashing. We completely got rid of cable, went to a cheaper cell phone plan, cut out all eating out and got rid of our gym memberships. I listened to just about every YouTube video on healthy eating on a budget and we cut our grocery bill in half.

We did a staycation instead of traveling. Our kids still say it was one of their favorite vacations. We became Craiglist and Ebay pros and started selling stuff around the house we did not use anyway (old, unused wedding gifts and toys were our first targets) as well as taking the kids’ old clothes and toys to consignment shops.

When things stabilize, do not make up for lost spending time. When your life returns to normal, do not immediately start adding expenses. We learned our lesson about the importance of having some money set aside for emergencies so the first thing we did was to build a small emergency fund of about $1,000.

Then we used calculators like the Debtblaster calculator to come up with a strategy to get rid of the debt. It took a few years, but we were able to pay off all of our debts. The key for us was to keep our frugal lifestyle until the debts were paid. As our incomes went up, we did not increase our lifestyle so in a weird way, our financial crisis led us to getting out of debt.

The biggest takeaway we got from our experience is to never assume your financial situation will not change. We are all one car accident, layoff or family emergency away from a crisis. Living below your means, paying off high interest credit debt and having an emergency fund are the greatest barriers to keep Murphy and his family from becoming uninvited guests in your life.

How to Better Prepare Your Kids to Manage Money in College

April 18, 2017

This is the season where I start to get invitations to friends’ and relatives’ kids’ high school graduations. It never fails to amaze me how quickly they grow up. As I start to think of these kids graduating, I realize many of them will be getting ready to go to college, completely unprepared for how they will handle money.

That was the case with me. My family never discussed money with me and when I went to college, the peer pressure of having to look a certain way and the desire to hang out friends quickly left me broke, no matter how much money I had. If I could go back to 1990, ten years ago when I graduated from high school (please allow me to remain in my mathematical delusion), I wish my parents would have better prepared me for managing my money in college by doing the following:

Give them an allowance that includes ALL of their monthly expenses. My parents gave me money as I needed or wanted. Typically, I would ask for money for the movies or to cover my expenses for being on the track team such as travel, hotel and sneakers…oh and I forgot – the money to get my hair done. I learned in college that I was high-maintenance and could not afford my own upkeep. Consider adding up how much you spend on your kids’ activities, personal care and outings and giving it to them to manage themselves.

Teach them how to think about upcoming expenses and budget the money they have. One of my favorite quotes about budgeting is from John Maxwell, “A budget is telling your money where to go before wondering where it went.” Walk your child through the budgeting process to get them thinking about upcoming expenses and how to create and stick to a budget.

A friend of mine opened a checking account for her child in high school. She deposited money into the account monthly for his expenses. She helped him create a budget using online software like Mint and she had a weekly budget meeting with him.

Her son had to show her how he spent the money for the week and how much he had left. She did this while he was in high school so the money management habits will kick in by the time he went to college. Consider doing something similar with your child to help create the habit of budgeting and thinking through their financial needs.

Teach your kids about credit. When I was in college, it seemed like every credit card company known to man was on my college campus. Even though it has gotten better, credit card companies still market to college students who have no idea what they are signing up for.

Luckily, the CARD Act of 2009 provided some level of protection to college students. The act cracked down on giving credit cards to students under the age of 21. Generally, a jobless student cannot get a credit card without proof of income or a co-signer, but eventually, they will be eligible for a credit card.

I thought credit cards offer “free” money that I could take my time paying back. I had no idea that in addition to paying for the items I bought, I was paying an additional 25% in interest. Help your children understand that the money is not free and that the less they pay on their credit card, the more money they will pay in the long run.

If you decide to give your child a credit card, first make she has good money management skills. Control the credit limit and check in weekly at first to make sure the credit card is being used wisely. Then switch to monthly meetings.

The last thing you want is for your child to walk out of college in credit card debt and with bad money management skills. Teach them good money management habits now to help them build a good financial future. What better graduation gift is there?

Are You Prepared for the Next Natural Disaster?

April 11, 2017

I seem to have a thing for natural disasters. I know that sounds strange, but I do. I cannot hear about a local natural disaster without immediately getting on the Internet to figure where I need to go to help. I think of how helpless I would feel if everything I had was gone, and I feel compelled to do something – even if it is to pick up debris or pass out sandwiches.

Doing this for a number of years has created what many would consider to be an unusual obsession with preparing for disasters. A lot of this comes from the lessons I learned being onsite to personal disasters and talking to people who have been through a natural disaster. Below are some of the lessons I learned:

ATM’s are in slim supply after a natural disaster. Keep cash on hand to cover necessities. I remember traveling two hours to a tornado site and helping with the cleanup all day. As I got in my car to go home, I saw that my gas was nearly on empty. It took me almost an hour to find a gas station since most were destroyed in the tornado.

The only one that was working could only accept cash. If I had no cash, I would had been stuck. Most people do not think about it, but most natural disasters take out power, which would also take out the ability to use an ATM and a store owner’s ability to accept plastic. Keep a certain amount of cash on hand to cover necessities in a disaster like gas and food.

Make sure your documents are in a place that can survive a disaster and give you easy access to the documents if you need to leave in a hurry unexpectedly. One of the biggest frustrations the survivors of the natural disasters I talk to experienced was not being able to get all of the available natural disaster aid immediately because they had no documentation to prove who they were or to file an insurance claim. What I learned from their stories was to make sure I have all of my important documents in one place that can survive a disaster, like a fire-proof safe. You can use checklists like the one on the FEMA website to gather your documents. You can take this one step further by storing your documents electronically as a backup plan in case you could not get to them otherwise.

Do not assume you are covered by your insurance. Review your insurance policies and call your insurance carrier and ask about coverage. Nothing broke my heart more than the anguish of people who realized that few or none of their possessions would be covered by their insurance carrier. Please do not assume that everything you own will be covered. Thirteen years of talking to natural disaster survivors have taught me that this is not the case.

Make it a practice to review your insurance policy annually. Consider using websites like AlertSystemsGroups.com to learn the disasters your area is the most at risk to experience. Contact your insurance carrier and ask if you are covered for these disasters.

Ideally, you want to be covered for cost to replace your possessions at today’s cost without factoring in depreciation. Also, do not assume your insurance company will take your word on everything you have in your home. Consider taking pictures of your possessions and scanning receipts of high dollar purchase to prove what you own.

Find out how you are covered if you can no longer live in your home. This may sound obvious, but one of the biggest needs for many survivors was having a place to stay if they could not live in their homes. FEMA does offer rental assistance, but this can take time when patience is in short supply. Contact your homeowner’s policy about additional living expenses coverage. This coverage could cover hotel, rental, and even restaurant meals and storage fees.

Don’t wait until it’s too late. Take action now. FEMA has a comprehensive guide to prepare you financially for a disaster, but don’t step there. Make it an annual practice to review your homeowner’s insurance policies to make sure that if the unexpected hits, you can return to your normal life as soon as possible.

Employee Benefits New Moms Need to Know

April 04, 2017

I joined the Army in 1993 and spent the next 11 years in the military. I have been called every name you can imagine in my military career. I have also accomplished things I never thought possible such as scaling a 3 story building, training in hand-to-hand combat and shooting a rocket launcher (my G.I. Joe moment). Later, I became an instructor helping people navigate through simulated grenade attacks. I did this with no tears, just a determination to finish anything I started.

With all I have experienced, you would think that there is nothing that could bring me to tears. I thought so too until I had to drop my newborn daughter off at her daycare for the first time. I cried so hard the day care director had to give me a hug. What made this easier was the wealth of benefits I took advantage of through my employer. If you are about to have a baby or recently had a baby, consider researching the following benefits:

Affinity Groups For Mothers. For all of you that are parents, you learned that there were things you did not even think to ask because you just did not know they might be a problem. I was lucky. My employer offered affinity groups for mothers and even classes for expectant mothers. I learned invaluable lessons such as when and how to tell your employer you are expecting and how to develop a transition maternity plan and a post-maternity plan for when you return.

Employee Assistance Programs. Personally, I think employee assistance programs (EAPs) are one of the most underused employer benefits. My EAP provided information on what to expect after my daughter was born and guidance on deciding what type of childcare works best for my needs. The right childcare is different for everyone. For some, a daycare center eliminates the uncertainty of finding last minute daycare if your nanny or in-home provider is sick or on vacation. For others, a nanny eliminates the uncertainty of your kid getting sick because of another child.

My EAP offered a daycare referral service that saved me hours of research. I filled out a form with the details of the type of daycare I wanted and they sent me a list of the daycare centers that met my criteria. This made the process so much easier.

Daycare Discount Programs. Some employers have partnerships with daycare centers. This could translate into substantial savings. Other employers offer “emergency daycare” programs where you get a discount if you need daycare for a day.

My employer partnered with a daycare center that discounted one day services to $25 – much cheaper than the normal drop in cost for that particular daycare. Some even offer daycare discounts for children who may be too sick for daycare (temperature over 100.5 in some cases) but not sick enough to be bedridden or go into a hospital. Contact your employer to get a list of possible daycare discounts. The list can literally save you hundreds of dollars per month.

Dependent Care Tax Breaks. For those of you that have children under the age of 13, consider using a dependent care FSA to pay for daycare expenses pre-tax. If you are going to pay for daycare anyway, you might as well do it in a way that can help you save money on taxes. You can even use the dependent care FSA for summer camp. A good rule of thumb is the dependent care FSA may be the most beneficial for taxpayers in the 15% or higher tax bracket. If you are in the 15% or below tax bracket then paying the costs with after-tax money and taking the dependent care tax credit may be more beneficial.

Being a new mom can be tough, but you don’t have to be alone. Talk to co-workers who recently had children and contact your HR benefits department and your EAP to explore every benefit you have available to you. This will help make the transition to motherhood a lot easier.

Why and How to Have Weekly Money Talks

March 28, 2017

When I first got married, money talks in my home looked something like this: I brought out my spreadsheet and the four other programs I was working on to have a financial summit with my husband. He mentally tuned out the second he saw the first version of the budget and was in another place (I suspect it was at a college football game) by the time the meeting was over. Over the years, I learned to simplify my budgets and my husband brought both his mind and body to the meeting. My colleague Steve offers great insight into how to make couple money meetings work that I wish I knew from the beginning:

I have a confession to make. For over a decade in my professional career, I was the pot calling the kettle black. Almost 20 years ago, I followed the advice of a fellow CFP® professional and started advising clients to schedule a weekly 30 minute money meeting to focus on their finances, but I wasn’t doing these myself. Then about 7 years ago, I started having those meetings with my spouse and guess what? They work.

The basic idea is this. Many of us can go a month or longer and not spend any time thinking about our investments or whether we are spending our money on what is important to us instead of where we have always spent it. We pay our bills but don’t think about our spending plan.

On a side note, I hate the word “budget.” It sounds like “diet” to me. They both are limiting and negative.

A friend of mine told me “Steve, you’re a financial planner. Don’t think of it as a diet. Think of it as an eating plan.”

That works for me. I don’t think of my spending as a budget. I think of it as a spending plan.

The ideal time to have a conversation about money is not when you’re late for work, trying to get the kids off to school and have a deadline that is consuming all of your mental energy – been there done that. The Weekly 30 Minute Money Meeting can either be with yourself or with your partner. The rules are the same:

1.You cannot change the past. It is a waste of time to argue about or beat yourself up about things that have already happened. Learn from your mistakes (we have all made them) so you don’t repeat them in the future.

2. Be thoughtful and focus on the future. With my eating plan, if I choose to have a 1,500 calorie breakfast (which is delicious), I’d better plan on eating a lot of salad with little dressing for the rest of the day. If I choose to spend my future paychecks now (think credit cards), I’d better plan on not spending any other money.

3. Hold yourself accountable. Notice I didn’t say hold your partner accountable. We are adults and need to hold ourselves accountable. If you make a mistake, own it and try hard not to repeat it.

4. Schedule the meetings when your energy is high. I am an early morning person. I wake up at 5:30 am every day no matter the time zone or if it’s a weekend.

The ideal time for me would be 6:00 to 6:30 on Saturday morning. My wife’s response to this suggestion is not fit for publication. We meet from 11:00 to 11:30.

These are some tricks to make the most out of your meetings:

Put them on your calendar and if you think about something, pull your phone out and add a note to this week’s meeting. That way you don’t forget it.
Use the meetings to develop a spending plan. Your spending plan needs to get you, not the other way around. Look at your bank’s online tools, other online tools like Mint, our Easy Spending Plan, a custom made Excel spreadsheet or paper and pencil. Try different ones until you find the one that gets you.
Find an item in your spending plan that you buy because you have to but don’t enjoy spending money on and see if you can cut that cost. Think of auto insurance and electricity. Any money you can free up from those is money you can save or use for something you want.
Run a retirement estimator calculator and make sure you are on pace to retire. Update this at least once a year.
Run a DebtBlaster calculator and make sure you are paying off your debt as efficiently as possible. Update this every 6 months or when you pay something off.
Review your investments at least once a quarter and make sure you are taking an appropriate amount of risk.

As someone who has done this for a while, the benefits of these meetings include reduced financial stress, you and your partner having a plan and fostering honest, direct and sincere conversations about money. Start now. Don’t wait a decade…like some people.

Don’t Lose Your Voice When It Comes to Your Finances

March 14, 2017

My husband loves cars. No, I mean he really, really, really loves cars. Whenever he is driving, our conversations will quickly go from what we are going to eat for lunch to the engine power on the vehicle next to him – often in the same sentence.

I thought I was all alone, until my colleague, Vekevia, shared with me that her husband loves cars too. As we started talking, I wanted to share her wisdom on how to keep the peace in a household with very different interests, especially when one person manages the household finances. Below are her thoughts:

Some couples manage money together and other couples have one person who primarily manages the money. Usually, in cases where one spouse manages the finances for the family, that individual is more financially savvy or may just be better at handling that responsibility. That makes sense.

It becomes an issue when either spouse, most likely the one not handling the finances, feels like their financial goals or desires are overlooked or not taken as seriously as the other spouse’s financial goals or desires. This is especially true when you just do not see eye to eye on the value of what either spouse holds dear. I handle the finances in our family and have had to learn to work with my husband so that we both feel heard.

My husband is an avid car lover and I don’t just mean that he enjoys seeing nice cars. No, his passion extends far beyond that. He is fascinated over how a car is designed and built. He cares about the horsepower and enjoys seeing how it performs.

Every year, we go to a well-known racetrack in our area to see other car enthusiasts show off what they’ve built and race each other. As you might suspect, this is not cheap. On average, the cost to build a car like what you would see at this type of event can sit close to six figures and annual maintenance after racing can fall in the five-figure range. Guess what? He wants to build one.

Initially, this was a problem for me because I do not value cars the way he does. I just like when a car is visually appealing, dependable.…and INEXPENSIVE! The good news is that we are compromising and he plans to build a much less expensive car, but the financial planner in me wants to scream. Cars are depreciating assets that lose value rapidly over time.

However, my husband’s passion for cars, as expensive as it may be, holds a value that I can’t technically plug into my calculator and put down on paper. It would mean a lot to him for his dream to become a reality at some point this lifetime. I value him and his happiness. Life is short and you only live once.

Being financially healthy doesn’t mean denying yourself the things you’re passionate about just because of cost. It’s about fitting your passions into your budget. Sometimes, you may have to find ways to make more money or decrease your expenses. We’ve chosen to fit building a car into our budget, not at the sacrifice of keeping a roof over our head, saving for our son’s college, or being able to retire, but it’s important, so it’s there.

Are you in a similar situation with your spouse? Here are some tips to show your spouse he/she has a voice in your finances:

Have an open conversation about your financial passions or dreams.
Decide what you value most. (You may have to choose 1 or 2 passions each this go around and take on the others in your next lifetime.)
Calculate how much you need to save for other financial priorities like retirement and funding your kid’s education.
Estimate the cost of making it all a reality.
Determine if your current income can carry the cost.
Seek opportunities to increase your income. That might mean pursuing a degree to make a career change, going for a higher paying position, or taking on a second job for extra income.

Realize that the cost of something is important, but so is the way your partner feels when you are willing to acknowledge and support his/her interests. You both should have a voice in your finances and work together to set up a feasible plan to make your dreams become a reality.

You Got Your Financial Aid Packages – Now What?

March 07, 2017

I was recently talking to a friend at a party about college. Her daughter is a senior and will soon be going off to college. Her daughter was accepted to four different schools, all with varying financial aid packages, and her daughter’s first choice did not offer the largest package so she was considering her second choice. I told my friend to consider doing the following:

1. Review all of the financial aid packages to determine which package is the best vs. the largest. Consider how much of your need is being met along with how your need is being met. Is the largest package with the most loans really better than the smaller package with more grants and a small out-of-pocket expense? Luckily, the CPFB web site has a tool that can help you compare the financial aid packages of up to three schools.

2. Your financial aid award package is not written in stone. My friend recently filed for divorce so her reported income on the financial aid form is vastly different from her upcoming income. I encouraged her to contact the potential college financial aid offices and appeal the award. She can do this in writing and I also encouraged her to ask for a follow-up appointment.

If your financial situation has or will change, consider appealing. Most colleges have a formal appeal process. Contact the college for more details.

3. Use the best award packages to leverage a better financial aid award package from the desired school. Since my friend’s daughter was accepted to multiple colleges and she was going to appeal all of the packages anyway, I told her to use the best packages to get a higher award package from her first choice school.

Review the award packages and what they mean for your family carefully. Consider appealing if you feel you have a case based on a changing financial need or if you can leverage multiple offers. As you go through the process of picking a school, remember the old adage, “You don’t get, what you don’t ask for.”

How to Save Money on Your Next Auto Loan

February 28, 2017

My first car was what we call in the south a “hooptie.” I paid about $1,500 dollars for it. The car was a multiple array of rust-created colors and the air conditioning did not work, which was a joy during the hot southern summer. As a new car owner, there were a lot of car rules I ignored, such as regular car maintenance. As a result, I soon found myself on the side of a road with a locked engine due to no oil.

This made me rethink my ideas on car maintenance, but it also put me in a position where I needed a new car. With no experience or common sense, I walked into a nearby dealer, told him the payment that made the most sense to me and trusted him to find the car that matched my payment. To his credit, he stuck to my budget and helped me find a halfway decent car. The payments were in my budget and I was happy so I drove off and did not think anything of it.

Recently, I found the auto loan paperwork from that car and almost choked when I read the document. Had I known what to look for and asked when I was getting the auto loan, I could had saved myself thousands of dollars. If you are shopping for an auto loan consider doing the following.

1. Establish rules around how much of a car you can actually afford. Although I considered the payment, I did not take the actual cost of repairs under consideration. A great rule of thumb to use when budgeting for a car is the 20/4/10. This rules involves putting at least 20% down towards a car loan, financing a vehicle for no more than 4 years and keeping your total monthly vehicle expenses to less than 10% of your gross monthly income. (Monthly expenses includes insurance and gas.)

2. Pull up your credit report using websites like Annual Credit Report.com or use websites like Credit Karma or CreditSesame.com to gauge your credit score. The last thing you need is a surprise on your credit report as you talk to your potential auto lender.

3. Research your auto loan options through banks, credit unions and non-bank auto finance companies to find the best option for you. Consider getting pre-approval and using the CFPB’s Auto Loan Shopping Worksheet to compare your loans. Going into a dealership with a pre-approved loan gives you bargaining power.

4. Understand what’s in your auto loan contract. Find out if there is a pre-payment penalty if you pay off your loan early. Fees such as processing fees, dealer preparation fees and delivery charges may be negotiable. Even your interest rate may be negotiable. It never hurts to ask.

As you shop for a loan, consider printing the CPFB’s Auto Loan Shopping Worksheet and using it as a guide to shopping for loans. Also, read your contract carefully and constantly ask for discounts. Doing these few things can help you save potentially thousands on your auto loan.

Why Is Your Budget Failing?

February 21, 2017

Why is my budget failing? My friend asked me this question a few days ago. She has been trying to budget for the last few years and just can’t seem to stay on track. I told her that I have found that there are some common reasons why budgets fail and if she addressed the following common reasons why budgets fail, she can become a successful budgeter:

1. Budget categories bursting at the seams. Years ago, I worked with a woman who was diligent about creating and tracking a budget but struggled to handle emergencies. When I looked at her expenses, I saw that over 50% of her spending was her mortgage and 30% was a car payment. There was no wiggle room to handle emergencies. Luckily, she was able to get a roommate and downsize her car. Consider reviewing articles like this one as a starting point as to how much to spend in each budget category.

2. Not sticking to your budget. A budget only works if you actually follow it. I always tell people that there are two parts to a budget. One is forecasting what your spending needs are for the month and the other is tracking. If you are not doing both then it will be hard to stick your budget.

3. Using the wrong budgeting system. Using the wrong budgeting can make budgeting feel like a dreaded chore. If you hate technology, use a budgeting worksheet and either a notebook to write down expenses or keep receipts in an envelope. If you are comfortable with spreadsheets then use Excel, which can do the math for you. If you want more features then explore the various online budgeting software programs and find out which best matches how you want to budget.

4. Unrealistic Budgets. My friend had a family of seven that wanted to budget $350 a month for food. Considering she had five very tall teenage boys to feed, we decided that her budget was not realistic. If you find that you are constantly going over certain budget categories, consider increasing your budget and maybe using cash for purchases in that category. Also be honest with yourself. If a Mocha latte or a manicure keeps calling your name, just put the expense in your budget.

5. Not changing the budget with life changes. It’s rare that your spending is the same every month. As gas prices, food prices and your utility bills change, so will your budget. Be flexible and adjust your budget to accommodate changes in your expenses.

Now, these aren’t all of the reasons why budgets fail. But if you are struggling with your budget, the list above gives you a good starting point. With a few tweaks, most people can become budgeting gurus in no time!

How an Argument on Valentine’s Day Made Our Marriage Stronger

February 14, 2017

When I think of Valentine’s Day, I always think of my first Valentine’s Day after I got married. We were new homeowners undecided as to how to decorate our home. I am a saver and I wanted to bargain shop and slowly decorate. My husband is a spender who was tired of walking around empty rooms and wanted to start buying furniture without looking for a deal (gasp). Our discussion, or rather argument, about how we would buy furniture was the first dose of reality that we had very different thoughts about money.

Now, I am sure some of you are asking yourselves why she is talking about an argument on Valentine’s Day. Trust me. I am going somewhere with this. It was not easy, but after we both stopped pouting, our argument made us realize that in order to have peace, we needed to agree on how we will spend money as a couple so over the next few months we came up with a plan to manage our finances together. The following is how we were able to do it without strangling each other:

1. We had money meetings a few times a month. We had a meeting a few days before the new month began to discuss what expenses were coming up during the month and a shorter meeting before each pay period to make sure nothing changed or was forgotten. The longer we did this, the shorter the meetings became. This went a long way to prevent arguments about last minute unexpected spending. Consider using a budget worksheet as a tool to map out your spending plan as a couple.

2. We set up communication ground rules for the meeting. First, we agreed to obey the principle my kids learned in kindergarten that if you have nothing nice to say, then say nothing at all. We established the budget meeting as a no nagging, judging, and cursing zone with no sarcastic remarks allowed. We also had to give one compliment about how our spouse managed their money. Work with your partner to come up budget meeting ground rules.

3. I agreed to keep the meeting short and my husband agreed to bring his body and mind to the meeting. I also agreed to be flexible on the meeting times if important events arise, such as my husband’s favorite team playing. Agree on a meeting date and time where both of you can be mentally as well as physically present.

4. We set up 4 accounts: a joint checking account where both of our paychecks initially went into for the household bills, separate checking accounts where money was transferred from the joint checking account for personal spending that we did not have to consult each other on, and a joint savings account. We agreed on how much each of us would get to spend every pay period. Every couple is different, so discuss the best opton for the both of you.

5. We also came up with spending ground rules. For us, it was that we would not spend anything over $100 from our joint account without discussing the purchase with each other. We also agreed that we would not discuss money spent in our personal accounts. I deliberately mentioned this twice because for some couples, it’s important to have personal money you can spend freely.

So as odd as it sounds, our argument on Valentine’s Day was one of the best things that could have happened to us. It led us to getting on the same page about money, which brought us closer together as a couple. As you celebrate Valentine’s Day, consider using the day to go over ideas on how to help you and your partner manage money better together.

How to Choose a Student Loan

February 07, 2017

With the average cost of college being north of $20,000 for a public in-state school, student loans have become a big part of student’s financial aid packages. The two types of student loans are federal and private. There are important differences between them and knowing the difference can help students make the most informed decision.

Federal student loans are loans made or guaranteed by the government and private loans are essentially non-federal student loans made through lenders such as banks, credit unions, state agencies or schools. With the benefits of federal student loans, comes harsh consequences for default such as wage garnishments, difficulty discharging if you file for bankruptcy, possibly lost tax returns, and even Social Security payments. The three main types of federal student loans are:

Direct student loans, sometimes called direct Stafford loans, have low fixed interest rates and offer a variety of repayment options and forgiveness programs. They have limits as to how much of a loan you can get, which is different for undergraduate and graduate students. There are two basic types of direct student loans:

Direct subsidized loans are available to low income undergraduate students. Interest typically does not accrue while the student attends school, during the 6-month grace period after college and if student loan payments are delayed. Loan limits tend to be lower than the loan limits of unsubsidized loans.
Direct unsubsidized loans are available to undergraduate, graduate and professional students regardless of financial need. Interest accrues while the students are in school, during the grace period and during any student loan payment delays.

Perkins loans are fixed low interest loans for low-income undergraduate, graduate or professional students with financial needs. Like the subsidized loans, interest doesn’t accrue while you are in school and during your grace period, which is longer than the grace period for direct loans. Perkins offers a ton of cancellation options for a variety of situations and professions. You also have to attend a school that offers Perkins loans and the school determines the loan amounts.

PLUS loans are fixed rate loans for graduate or professional students and parents of dependent undergraduate students. To qualify, the borrower must not have an adverse credit history and interest accrues even when the student is in college. PLUS loans are eligible for nearly all of the repayment options offered by the US Department of Education. Parent PLUS loans are eligible for most of the repayment options.

Private loan interest rates and benefits vary per institution. Some offer a variety of repayment options and programs if you experience a hardship, so compare loans before making a decision. Typically, with private loans:

The interest rates tend to be higher than most federal student loans
They offer almost no loan forgiveness programs, cancellations or the variety of repayment options offered by federal loans
A credit check and possibly co-signing may be needed to get a loan
You can generally borrow a higher amount than you can with a federal loan

As you weigh your options consider the following:

Can you demonstrate a financial need? If so, you may qualify for a direct subsidized loan or a Perkins loan, which typically offers the perks of low interest rates, not accruing interest while you’re in school, and a variety of repayment options. However, both loans have limits to the amounts you can borrow.

What degree are you pursuing? If you are pursuing a graduate degree, you generally do not qualify for a direct subsidized loan, so if you have limited finances, a Perkins loan may be a consideration. A direct unsubsidized loan is a consideration if you do not qualify for a Perkins loan and may have adverse credit. A graduate student can also get a graduate PLUS loan, which typically has higher borrowing limits (cost of attendance minus any financial aid) but takes your credit under consideration. The loans offer forgiveness programs and a variety of repayment options

How much money is needed to pay for college? Federal loans typically limit the amount you can borrow. Private loans can offer a higher amount, but they generally come with higher interest rates. Evaluate your needs and if possible, tap into the federal loans before getting private loans.

What are your career aspirations? Perkins loans offers a variety of cancellation options, including options for teachers who serve low-income children, certain medical professionals, and even librarians who work in certain schools and libraries.

Student loans can be confusing. Don’t just take the first one offered though. Researching the features can help you make the best decision.

What If I Can’t Pay My Mortgage?

January 31, 2017

Recently, I received a call from a friend that was laid off a few months ago. She was worried that it was taking longer than she thought to find permanent employment and she was not sure how long her savings would last. She was concerned about not being able to pay her mortgage and was looking for options. My guidance for her was to do the following:

First, contact your mortgage lender ASAP. Even if you are current, contact your lender to let them know you may have a problem in the future. The earlier you contact them, the more likely they are to work with you and the more programs you may be eligible for.

Assess your situation. Most options will involve assessing your current finances to determine your ability to pay your mortgage now and in the future as well as a written reason why you cannot pay your mortgage. Create a budget and assess what you can afford to pay.

Then review your budget for areas where you can cut back. Shelter is essential, so if you are current on your credit cards and late on your mortgage, consider focusing on your mortgage. Ideally, your home expenses (mortgage, HOA dues, etc.) should not take up more than 25%-35% of your take home income.

In my friend’s case, her situation was temporary and her mortgage was affordable. She had savings and could always do contract work if she could not find a permanent full-time job. If your financial situation is temporary and you will be able to pay your mortgage plus catch up on overdue payments in the future, consider the following options:

Forbearance. A forbearance temporarily reduces or suspends your mortgage payments for a set period of time. Keep in mind that once your forbearance period ends, you are expected to set up a plan to get current on your mortgage, which means paying both your current mortgage and overdue payments.
Repayment. If you can make your current mortgage payment but struggle to repay overdue payments, a repayment plan may be an option. A repayment allows you to spread your past due amounts over a period of time.

If your financial situation is long term or you will have difficulty, making payments to get your mortgage current consider the following options if you want to stay in your home:

Modifying your loan. Your lender agrees to change the terms of the loan to make the payments affordable. The changes may involve changing the interest rate, the length of the loan, or the payment amount or adding past due amounts to your mortgage principal.
Refinancing. If you are current on your mortgage and have equity in your home, you may qualify to refinance your home. You get a new mortgage with interest rates and terms that may lower your payments. Even if you do not have enough equity in your home, you still may qualify for refinancing under the government’s Home Afforable Refinance Program (HARP).

If you if find that even with a modification you may not be able to afford the mortgage payment or you are ready to leave your home consider the following options:

Deed-in-Lieu. Also called a mortgage release, a deed-in-lieu is an option where your lender agrees to let you voluntarily transfer the property title to them in exchange for being released from your mortgage obligation. This option can negatively impact your credit score.
Short Sale. Sometimes known as a “pre-foreclosure” sale, a short sale is when your lender agrees to let you sell your home for less than your mortgage balance. This option may be a consideration if you do not qualify for a refinance or modification and your home is worth less than the mortgage. This option can also negatively impact your credit score.
Renting. Depending on your location, you may be able to rent your home until you are ready to sell or your financial situation has improved enough to where you can afford the payments. Websites like Zillow can give you a gauge as to how much you may be able to get in rental income.

As you can see, there are a lot of options. The most important thing is to keep the lines of communication with your lender open. The earlier you contact them, even if you are current, the more options they may have for you and the more likely they are to work with you.

Why and How Caregivers Should Create a Personal Care Agreement

January 24, 2017

As my friends and I enter our late 40s and 50s, I find we talk more about caring for our parents than any other topic. For some, the care involves an occasional check-in and phone call. For others, it involves full-time care. A few were even thinking of quitting their jobs so they can take care of their parents full-time.

If you find yourself facing the same decision, consider creating a formal agreement, known as a personal care agreement, that can help manage the expectations of the person receiving care and their family members and clarify the compensation the caregiver will receive. (You can see a sample here.) Before creating it, consider discussing your desires with family members to avoid conflicts and resolve concerns. Generally, there are three basic components of a personal care agreement:

It should be in writing.
Money received is for future not past care.
Compensation must be reasonable, similar to what a caregiver in your area would charge for the same service. Consider looking at online job agencies like Monster to find out the average pay for the services you will be providing.

The other parts of the agreement to consider are to:

Note when the care will begin as well as the expected length of the agreement.
Include where the services are expected to be given, such as the care recipient’s home.
Detail the services the caregiver will provide such as food preparation, transportation, etc. In addition to talking to the care recipient about the services he or she wants, consider consulting with the care recipient’s medical providers to determine the level of service needed. Assess the level of care the caregiver is capable of giving.
Estimate the expected number of hours or days of the week for the services to be rendered. Consider writing a plan to account for the caregiver’s time off such as illness or vacations.
Cite the amount of compensation and dates of payments. If the caregiver plans to live with the person they are caring for, consider including whether there is an expectation of payment for room and board.
Consider adding in an “escape clause” so each party can terminate the contract. This will go a long way in preserving the relationship.
Have the completed document signed by all parties (if the care recipient cannot sign, then the durable power of attorney agent should sign) and notarized.

As you can see, drawing up a personal care agreement can quickly get complicated. Consider consulting with an attorney. See if you have a workplace benefit for free or reduced cost legal services to help you write the agreement. Doing your due diligence can help alleviate stress and prevent a lot of conflict.

How to Budget for Child Care

January 17, 2017

I was flipping through old pictures of my children and came across the one above. My daughter, now 7, was about 10 months old in this picture. My friend needed a baby for a photo shoot and I volunteered my daughter if I could get copies of the photos. This picture is one of my favorites.

As I think back to when she was a baby, I can’t help but think of how expensive that time in our lives was. In fact, I used to call her my little mortgage payment. With the average cost of childcare for an infant easily exceeding $10,000 a year, many parents struggle to budget for it. The following strategies can help take the financial bite out of child care:

1. Create a budget to see exactly how much you can spend on child care. Look for items you can cut back on such as cable, eating out or entertainment.

2. Once you have created your budget, decide how much you can reasonable afford for child care. Contact your employer to see if they offer a child care search services. Research childcare options that meet your budget. A private nanny may be out, but a quality daycare facility may fit into your budget. A friend of mine did her budget and realized that it was cheaper for her to stay home rather than put her children in daycare.

3. Once you have narrowed potential childcare providers, ask about discounts. You may be able to get an employee discount or a discount based on where you live or if you have multiple children attending the same daycare. If your income is limited, contact your child care provider or your state’s Child Care Program Office about financial assistance.

4. Consider using employer savings plans like a dependent care FSA to save money for daycare pre-tax or claiming a dependent care tax credit on your taxes. Since you can’t use both on the same expense, weigh your options to see which one is better. In general, a dependent care FSA is better for higher income earners (above the 15% tax bracket) and the dependent care tax credit is better for lower income wage earners.

Don’t let yourself get overwhelmed by the cost of daycare. With a little bit of planning, childcare does not have to bust your budget. A little bit of research can go a long way to helping you find the best childcare option for your needs.

How to Create a Budget After Divorce

January 10, 2017

It’s probably not going out on a limb to say that just about everyone knows of someone who either got divorced or is getting divorced. Over the years, I have worked with several people getting ready to divorce and I find many are unprepared for what life is like financially afterwards. Going from two incomes to one means an overhaul of your finances and for some, a readjustment of their lifestyle. If you find yourself wondering how to put all of this together after a divorce, consider using the following tips to get you on the right track:

1. Know what money is coming in. Review payments you may be getting or receiving from your divorce and adjust your total income accordingly. Typically, child support does not impact your income tax whereas alimony paid can reduce your income and alimony received counts as income. If you are getting or receiving alimony, you can use the IRS tax withholding calculator to make sure you aren’t paying too little in taxes or giving the IRS a large tax-free loan

2. Know what money is coming out. Create a spending plan to account for how much money you need to have monthly to maintain your lifestyle. Consider ALL of your expenses beyond mortgage/rent, car payments and debts. Typically, the most underestimated and forgotten are auto and home maintenance, groceries and eating out.

If you are not sure where to begin, consider using online tools at your bank to find out how much you have been spending. Most online tools will categorize your spending, so first consider adjusting the categories. Then choose a 30-90 period to see what your average spending looks like.

3. Know what the difference is. Subtract your income from your expenses to gauge if you can afford your current lifestyle. If you have a surplus, review your numbers to make sure they are realistic, you have a category for savings and you have a buffer (10% or greater) to account for unexpected expenses (better known as Murphy’s Law).

Also review how much you are spending in each category. For instance the guidance is for household expenses to take up no more than 25%-35% of your net income and auto expenses (car loan, insurance, gas and maintenance) should be no more than 20% of your take-home pay. If you are spending more in those categories, you may not have the cushion to lessen the blow of an unexpected expense. If you have a deficit, then you may not be able to afford your current lifestyle and expenses may need to be cut. This could mean downsizing to a less expensive home, a less expensive car and in some cases, a less expensive neighborhood.

Divorce is hard enough on its own. You don’t want it to cause too many financial problems as well. Taking the time to review your expenses after a divorce can go a long way into making the transition process easier.

How to Stop Hating New Year’s Resolutions

January 03, 2017

I was having a conversation with friends over my favorite dessert, which is basically anything chocolate. One of my friends mentioned New Year’s resolutions and like a symphony, I heard a range of moans and groans. I told them to consider re-framing their idea of success by focusing on consistently (not perfectly) making small changes instead of focusing only on the end goal. If they change their behavior and do it consistently, the natural byproduct is their goal. I gave them the following as a starting point to consider.

Being Healthier:

1. Replace two drinks a day with water. If you cannot stand the tastelessness of water, throw in some fruit – strawberries, lemons, etc for extra taste.

2. Fill half of your plate at lunch or dinner with vegetables. A salad is a quick and easy solution. Just minimize the dressing to 2 tablespoons or less.

3. Consider having a “walking” meeting with a colleague. Commit to a 15-minute walk during lunch. If you travel a lot, you can use workout apps with various workout programs and even a coach to keep you motivated like Aaptiv or Fitstar.

Saving money

1. Start off with an amount you are confident you can save per pay period and adjust your payroll to have the funds automatically sent from your paycheck to a savings account. You can always increase the amount.

2. Consider using the “round-up-to-the-nearest-dollar” bank savings feature or have deposits (interest, ATM usage rebate) automatically deposited into your checking account.

3. Have a “no-spend day” when you choose where you are committed to not spending any money for the day.

Becoming Debt Free

1. Stop using your credit card. The easiest way to reduce the amount you owe is not to acquire any new debt.

2. Call your creditors and ask for an interest rate reduction. Research from CreditCards.com cited that 3 out of 4 people who ask for interest rate deductions actually get it.

3. As we head into tax season, consider earmarking part of your tax return to reduce your debt.

What are your goals? Starting off with the small changes can give you the quick wins to keep you motivated to reach them by the end of 2017. Then maybe you won’t groan the next time you hear about New Year’s resolutions!

What to Do Before You Adopt

December 27, 2016

I recently had the joy of attending a party for friends that finalized the adoption of their son. I watch them go through the emotional highs and lows of their 18-month process. Afterwards, I asked them for lessons learned from the adoption process. They both said they wished that strategies to financially prepare for adoption were emphasized as much as the legal process. If they could go back, they would had put more emphasis on the following:

1. Assess your own finances. Ideally, you should have 3-6 months worth of living expenses saved (separate from the funds for adoption) so an emergency does not derail you from adopting. Living expenses should be captured in a spending plan so you have a clear idea of how much you need to have monthly to maintain your living standard.

2. Calculate the best and worst case adoption expense. The type of adoption you choose can dramatically affect adoption costs, which can range from $0 to $50,000. Include the costs of bringing the child(ren) into your household – furniture, clothing, school activities, extra healthcare insurance, etc.

Research the costs for the type of adoption you are considering and be prepared to be flexible. If an international adoption is cost prohibitive, a domestic program may be a consideration. Some state foster to adoption programs can be run privately, offering a plethora of services at minimum costs.

3. Research how you will come up with the funds. Calculate how much you can save per month and how long it will take for to have the funds for the expenses. If you find yourself short of funds, research alternatives. Think outside the box and network with other adoptive parents to come up with ideas. If you have a gift for spinning a compelling story, consider starting a GoFundMe fund, conduct a fundraising activity or ask your employer about adoption assistance.

4. Understand tax incentives for adoptions. Aside from your employer’s adoption assistance, research the various tax incentives for adoptions. IRS Publication Topic 607 spells out expenses that qualifies for the adoption credit and adoption assistance programs. There is a nonrefundable credit for qualified adoption expenses and possibly an exclusion of income for employer-provided adoption assistance.

Don’t make the same mistake as my friends. Consider taking some time to research not only the adoption legal process but also the financial impact an adoption may have on your finances. The better prepared you are, the less likely a financial hiccup will affect your desire to grow your family.

How to Stay Sane During School Breaks

December 20, 2016

I love the holidays. The world seems to slow down a little and I get the time to catch up with friends and family. The chocolate is even better. But with every holiday, comes a winter break and the inevitable question of what to do with the kids comes up. With the babysitters called “TVs” and “iPads” quickly exhausted, the following are cost effective ways to entertain kids during school breaks.

1. Organize babysitting swaps. If you have neighbors with kids close to your kids’ ages, consider doing a swap where parents take turns managing the children, giving the other parents a break. As odd as it may sound, it is sometimes easier to have a lot of kids that can entertain themselves than one or two kids who expect you to be their entertainment.

2. Look for winter break camps in your area. Some are surprisingly affordable, but the affordable ones go quickly so start early. Consider looking into the programs at your local YMCA or community center.

3. Eat out on the cheap. Eating out in a restaurant is a fun activity for the kids. For many of us, the problem is the expense. MyKidsEatFree.com is a national database of places where your kids can either eat at a reduced cost or for free. You can also Google your local area for places where kids can eat for free.

4. Look for free activities. Stores like the Pottery Barn and Home Depot have fun kids’ activities. Local malls as well as your local public library also host kids’ events.

5. Plan an agenda. I got this one from my colleague, Cynthia, and it worked like a charm. I planned a series of events for the kids to include a talent show. This kept them occupied until the evening. I also had them watch a few movies and created a trivia game of questions to answer about the movie for a prize.

Holidays with the family is wonderful and tough at the same time. With these strategies, they don’t have to blow your budget. Then they can truly be happy holidays.