A Big Day And A Bigger Check?

July 17, 2015

Many moons ago, I remember going from catering company to catering company doing tastings for my wedding. Then there were the conversations with florists, musicians, photographers, venues, etc…it’s all a blur now. Because it was a long time ago and because I was trying to be frugal, the wedding came in well below the average cost of a wedding. I believe that all in, the cost was around $10,000 for everything. Sadly, the divorce 17 years later cost WAY more than that!!! Continue reading “A Big Day And A Bigger Check?”

What Alligators Taught Me About Budgeting

July 14, 2015

My family and I are history buffs so we try to choose cities with lots of history to visit. This year, we chose St. Augustine, Fl. It is considered to be the oldest city in the country and is full of historical sites and museums that kept the kids entertained. Continue reading “What Alligators Taught Me About Budgeting”

3 Reasons You Probably Don’t Save Enough

May 28, 2015

Whether your main financial goal is to pay off debt, buy a home, or retire comfortably, chances are that saving money will be instrumental to achieving it. Yet too many of us just aren’t saving enough. Why is that? The following are the three main culprits I’ve found and what to do about them: Continue reading “3 Reasons You Probably Don’t Save Enough”

The Best Laid Plans…

May 14, 2015

Let’s face it. No matter how perfectly you plan your expenses, life will always throw you those unexpected curveballs that could wreak havoc on even the best of budgets. After all, it’s impossible to account for everything that could possibly happen to your life. I’m not just talking about the real emergencies like a broken car you need to get to work. There are also things like weddings to attend and your kid’s piano lessons…not exactly “emergencies” but not quite frivolous spending either. Here are some ways to prevent these expenses from derailing your financial plans: Continue reading “The Best Laid Plans…”

How to Choose the Best Student Loan Repayment Plan

May 08, 2015

I had a conversation with a young man in his early 20’s recently who had just started his first “real job” and was about 60 days from his student loans going out of deferral. He was panicking because there are a whole lot of options to repay student loans today that didn’t exist when I had student loans. (My son would like to add that they also didn’t have electricity or cars when I had student loans.)

Looking at the options in front of him, I could understand his dilemma.  I had 2 options when I graduated – a straight 10 year term loan and a “graduated” payment plan that started with small payments and increased every 2 years to a level well above the standard monthly payment. Both of those options still exist today, but there are also many other choices. It is a very tough decision, and it can impact the next 10-20 years of cash flow. This is one of the biggest financial decisions a new graduate will make.

The young man I talked to had about $80,000 in student loan debt and had no idea what to do. So he came in and we talked through some options and did some number crunching.  Here are a few of his options, along with some financial highlights:

  • As a starting point, the fixed payment over 10 years would be about $925/month. A graduated payment for him would start at a more manageable $530 and eventually rise to $1,593/month. The flat payment costs $111,000 over 10 years while the graduated would require $119,000 over that 10 year window.
  • He has the option to do extended term payments, either at a fixed payment or a graduated payment. By extending from 10 years to 25, his fixed payment drops to $555/month but the total payments over the life of the loan increases to $166,000. In the graduated plan, he starts at $453 and increases over time to $793, and the total payments are $180,000. Lesson learned:  Extending the payments can help reduce cash outflow for those at the start of their careers, but the total cost of the loan rises substantially!  If there’s any way to afford the higher payments by not extending, don’t extend.  It’s a very expensive extension.
  • A relatively new type of option is an income-based repayment (IBR) plan. These loans are popular because the payment is limited to 15% of the borrower’s “discretionary income.” Discretionary income is defined as the gap between adjusted gross income and 150% of the federal poverty guidelines. For this young man, his IBR payments based on his $50,000 salary would be $400-$900 over the 225 month term of his loan as his income rises. He would pay $155,000 in total, which is more than the 10 year loans but less than the extended term loans. Lesson learned:  IBR is the “hot option” right now, but it isn’t always better than a straight standard term loan. Know your numbers and you may see a better option. This could be a much better option for borrowers who hope to grow their income over time than the extended payment plans.
  • Another relatively new option is the “Pay as You Earn” repayment plan. It is similar to the IBR but with a few differences. It’s more difficult to qualify for PAYE than IBR but the payments are 10% of discretionary income rather than 15%. Looking at his numbers, his payments would start at $270 and eventually move to $825.  After 20 years, he would have paid $121,000 and would have $66,000 forgiven at the end of his term. Lesson learned: This is a tough loan repayment plan to qualify for, but it eases the cash flow and makes the risk of default quite low. Of all the options, this one made the most sense for him. He can qualify for the lower initial payments and he can increase his payments as his income rises. He can also, with a low initial payment, add principal to each payment with the hopes of paying off the loans well in advance of the full term.

When looking at student loan repayment options, know that the world has changed.  These options are available through the Department Of Education and there are other newer options out there like www.SoFi.com, where borrowers can refinance without a bank being involved through peer-to-peer lending. This can be a great way for borrowers to get out of high-interest student loans. What I learned during my conversation with him is that the right answer is going to be different for everyone.  There is no single “best option.” Factors like current income, expected future income, cash flow constraints and other goals (buying a house or car) should be considered as well as things like affordability today, total interest paid over the loan’s life and total lifetime payments. It’s a complex web of options, but if you understand which factors are most important to you, the right repayment option should become clear once you start analyzing your real numbers. This post was originally published on the Financial Finesse column on Forbes.com.

Financial Planning For Any Weather

May 06, 2015

In some parts of the country, May means beautiful flowers and beautiful weather but for most of us, it also means checking the weather app on your phone constantly to have a clue of what’s going to happen. Will it be a mild spring day, rainy, or shorts and flip-flop weather? At least you can get a good guess from the weather app, but what about the unexpected events in your financial life? How do you prepare for life’s unexpected changes? Continue reading “Financial Planning For Any Weather”

Only You Can Prevent Financial Fires

March 24, 2015

Not to date myself, but I used to love the Smokey the Bear commercials about how, “Only You Can Prevent Wildfires.” Well, when it comes to financial fires, the same rule applies. Although everything around you seems like it is out of your control, there are things within your control that you can do. Continue reading “Only You Can Prevent Financial Fires”

How to Find Lost Money

March 16, 2015

A few weeks ago, a truck and the trailer attached to it were stolen from a hotel parking lot in the suburbs of Atlanta. Unfortunately, it seems like crimes like this happen on a daily basis. In the case of this particular theft, it is likely the nighttime bandits had no idea what they were actually stealing. Continue reading “How to Find Lost Money”

It’s Time For Changes to Payday Loans

March 06, 2015

In what is a positive development for many Americans, not to mention society at large, there are some changes coming to the world of payday loans. The CFPB (Consumer Financial Protection Bureau) is rolling out some new regulations for the short-term loan industry that can only be viewed as a good thing by the borrowers. (Maybe not so much for the owners of the lending companies, though.)  Continue reading “It’s Time For Changes to Payday Loans”

How to Manage Money as a Couple

February 24, 2015

I was talking to a young married couple who was fighting over money. What fascinated me the most was that they just got back from their honeymoon. The ink is not even dry on their wedding certificate and they are already screaming divorce. They then came to me for advice. As l listened, it sounded like my husband and myself during our first year or marriage and I shared some of the lessons learned in how to manage money as a couple, especially when you are very different people. Continue reading “How to Manage Money as a Couple”

Lessons Learned From A Home Ownership Dream Gone Sour

February 17, 2015

Recently, I was talking to a friend and she told me that she was selling her home because her American Dream of Home Ownership has become an American Horror Story. She then sighed and said if only she can go back and advise her former self. I asked her what she would say and she began sharing her lessons learned. Continue reading “Lessons Learned From A Home Ownership Dream Gone Sour”

You Are Not Your Financial Situation

January 27, 2015

When I tell people what I do for a living, I almost always get questions on how to become financially secure. As I started to talk to people, I noticed that a pattern started to emerge. People started connecting themselves to their financial situation vs. seeing their situation as a temporary situation. Continue reading “You Are Not Your Financial Situation”

Where is Your “Government Waste?”

January 09, 2015

Every year, in the December/January time frame, there are a lot of articles looking back at the prior year or looking forward to the New Year.As a bit of a political junkie, I love reading stories about predictions for the coming year but one of my favorite things to see each year is a look at how the government (mis)spent enormous sums of taxpayer’s dollars. This isn’t a Democratic or a Republican issue; it’s a big organization problem.  Continue reading “Where is Your “Government Waste?””

Happy Holidays Now and in January

December 01, 2014

The holiday season is officially here and I can honestly say that it may take me a few days to fully recover from Thanksgiving dinner (and a few rounds of leftovers). Despite spending about 20 hours in a car, it was fun setting some time aside to do nothing but eat, watch football, and express a little gratitude. In our household, the peaceful tradition of starting an Advent calendar on December 1st is usually countered by the hectic activity of trying to coordinate family logistics for the next month. Continue reading “Happy Holidays Now and in January”

Do You Need Some Financial Flossing?

October 31, 2014

Recently I was talking with one of my coworkers and I said the following about something at work “It’s like flossing…I know I need to do it, and I do, but I try to find ways to postpone it as long as possible!” He thought it sounded like a blog topic about the financial lives of so many people, so here we are! What are some things that we KNOW we need to do financially, but they are so “not fun” that we either don’t do them or we keep putting them off indefinitely? Continue reading “Do You Need Some Financial Flossing?”

Why Wait Until Next Year to Plan Your Future?

October 27, 2014

It seems like every fall I try to take some time to enjoy a few minutes of solitude and reflect on the experiences of the current year. This is also a time where I usually acknowledge that the to-do list that I created earlier in the year still reveals some unfinished business. As a financial planner, I’ll admit that this includes some things on my family’s financial planning checklist that still need some attention. Continue reading “Why Wait Until Next Year to Plan Your Future?”

Should You Have an Anti-Budget?

October 16, 2014

A friend of mine recently sent me this blog post called “How the Anti-Budget Can Save Your Wallet.” The basic premise is that a traditional budget isn’t realistic for most people because they just don’t stick to it and it isn’t even necessary to have one. Instead, it suggests simply setting aside your savings first (at least 20% of your income) and just spending the rest without having to categorize each of your expenses. Continue reading “Should You Have an Anti-Budget?”

What I Am Teaching My Kids About Money

October 13, 2014

As you may know from following this blog, I have just completed my dissertation and other requirements to earn my Ph.D in Personal Financial Planning from Kansas State University so we now have two proud Wildcat alums on staff here. (Doug Spencer is the other. He personifies loyalty to one’s alma mater and has plenty of purple shirts in his wardrobe to prove it.) Continue reading “What I Am Teaching My Kids About Money”

Repair or Replace?

October 07, 2014

After being towed to the auto repair shop, my stepson got the bad news last week that his beloved 2005 sporty Monte Carlo needs a new transmission.  He can pay $2,600 for a new one or $1,800 for a rebuilt transmission, but either way, the cost of the repair is almost what the car is worth, according to Kelly Blue Book.  No matter how much he loves his car, he’s come to the realization that it doesn’t make sense to dump any more money into a clunker car with over 160,000 miles.  He’s seen a lot of good times in the Monte Carlo, but now as a new dad of a toddler, having a two-door sports car has become a drag.  Continue reading “Repair or Replace?”