Whose money is it?

This one question can change how you make decisions, live your life, and handle your finances.  Everyone should ask it…


Whose money is it?


Major Implications


If you are a believer in God, this question can be asked in this way:


Is it MY money or is it God’s Money?


Answering this question can have huge ramifications.  It can totally change how you spend, save, and use your money.  If it is God’s money, then it makes sense to ask, “What does God want me to do with it?”


The answer you come up with may be completely different compared to how you are currently using your money.  Being a steward of God’s money becomes the focus instead of just doing what you want.  


Married Couples


Are you married?  If so, this question can be asked:


Is it MY money or is it OUR money?


Many think of the money they earn at their job as separate from their spouses money.  Mine is mine, yours is yours.


As people get married later in life, it is common to have two mature financial situations coming into a marriage.  Each person has supported themselves for years and it doesn’t occur to them that much has changed after they tie the knot.  Especially if the couple lived with one another before marriage.  


They go on, financially speaking, the same way they have before the marriage.


Bills are separate.  One spouse will have bills that they are responsible for and the other spouse will have their own bills. For example, the mortgage is MY bill and the student loan is HER responsibility.  It is MY income and HER income. Savings accounts are separate.  


I have friends who say that keeping money separate keeps them from conflict.  It is just easier that way and they would probably get into more arguments if they combined their finances.   


Others keep their money separate with the exception of an account that they pay bills out of.  Each spouse puts an amount of money into the account that they pay rent/mortgage, utilities, etc out of -- things that influences each of them.  


My money, YOUR money, and OUR money so to speak.  


What Has Worked For Us


My wife and I have decided that all money and income is in the OUR money bucket.  I think this way naturally follows the very point of marriage that you give up your single identity and a new married identity is formed… two become one.  


I also believe in the power to work as one.  When it is OUR money and we have set financial goals that are OURS, we are more likely to be working together and the progress we will make is greater.  In fact, this power can be amazing! I have seen it in our clients’ experience and I have experienced myself.


Regardless of my beliefs, it is a good idea for couples to ask the question and honestly discuss it with each other.  If there is major disagreement around this question years of conflict can ensue. In fact, discussing this question may reveal the root of a lot of money conflict in a marriage.  Any disagreement in views around this hopefully will be discussed with empathy towards the other and worked out so a workable plan for both can be set up.


If you would like other questions that would be good for couples to discuss around the subject of money get them HERE.


In my family, we have felt it helpful to clearly identify how we think about our money resources:


  • First and foremost, it is God’s money.  He has for whatever reason blessed us with these resources.  We strive to be good stewards.

  • Second, all wealth and income that He has allowed us to attain is ours as a couple to decide together what to do with it.  There is no his and her money.   

  • Lastly, we have chosen to designate an equal small amount of our income each month that each of us has power to do with whatever we want.  No guilt spending money. We find this allows us important freedom and is healthy for our marriage.


This has helped us get our money decisions more in line with our values and strengthened our marriage.  Sometimes we fail to keep this structure in mind as we handle our money, but talking about money as a couple frequently helps us to bring us back to focus when we get away from the ideal.


So, I challenge you to be honest and ask the question:


Whose money is it?


Wealth Isn't Just About Money (Part 2)

When I was in college, my uncle Len died of cancer.  He was my Dad’s older brother. Almost everyone called him Bunny.


Side note:  In his last hours of life, I was participating in the University of Iowa Dance Marathon, an amazing 36 hour student-led event where I went to college.  I was helping to raise money for families who were dealing with cancer at the exact time he was dying from cancer. There was a message on my answering machine when I got back to my dorm room from my parents.  I knew what they were calling about. I have always felt blessed to have the timing work out that way.


After Bunny died, my family began to meet each year in their hometown of Detroit Lakes, Minnesota as a kind of remembrance.  The first few years we participated as a family in the Relay for Life event held overnight at the local high school track. Luminaries would be lit around the track honoring those who had lost their lives to cancer.  It was very powerful.  


Then someone had an idea to do something different -- a golf outing.  This summer, we had the 19th annual “Bunny Open”.  


The family reunion always begins on Friday evening for a potluck.  For years we would gather at Tom and Mary’s farmhouse. When games were played, “country rules” were always in affect.  Now we meet at the RV park where Gary and Donna stay. Most of the time is spent eating and catching up with the goings ons of everyone.  Simple family fun.


The golf outing the next morning is not too serious.  We only play 9 holes. Most of us do not golf much. In fact, for some, the only time they have ever golfed in their life has been for this event.  It is possible that some of the clubs used during the event are older than me.  


My dad and Uncle Bob do a good job organizing it.  It is a best-ball format and there are hole prizes and everything.  We get a golf ball and tees each year emblazoned with “Bunny Open” and the date.  After the round, many of those who didn’t golf gather for a simple lunch before everyone goes on their way.


It is a great time to get together and remember.  Others have passed on over the years. Bunny’s wife Carol died seven years after him.  Then Vi… Then 6 year old Timmy… Then Tom... recently Dianne passed. It is called the Bunny Open, but we remember all of them during the event.


We will continue to meet and share memories in the years to come.  It is an important tradition in our family. 


Wealth is not just about money.  THIS is also wealth. 


Family traditions are wealth!


I take comfort in knowing that if I became completely broke tomorrow, I would still be wealthy.  I have a strong church community, a great neighborhood, close friends, and a close-knit extended family.  


As my Dad’s generation gets older, it will be interesting to see how my generation continues this and other traditions like these.  It becomes easy to allow each of our busy lives to get in the way of keeping the family traditions going. And as more family members move greater distances away from the event, it can be difficult.  


It will be our job to maintain traditions or come up with new ones.  Continuing the opportunities to spend time together and committing ourselves for family bonding time is crucial.


What family traditions do you have?  What family traditions can you begin?


Wealth Isn’t Just About Money (Part 1)

The 4th of July in my neighborhood is special. We line our yards with American flags. This has been such a tradition that some when they move out of the neighborhood pass down a box of flags and July 4th decorations to the family moving in so they have the proper items for this event.



Then we have the annual parade. This year marked the 50+ year in a row.



The kids work hard the night before and that morning to decorate their bikes or other mode of transportation with red, white, and blue. At 10 am sharp, the kids start at one end of the street and the parade begins.



The adults line the street to smile, clap, and wave when they go past. Some children throw candy which they got from a local parade the night before that they attended. When they get to the end of the street (just one block down) they turn around and come back… it takes less than 10 minutes in total.



It is adorable.

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Afterwards, friends and neighbors meet for a potluck brunch. We eat. We talk. We catch up on the news of everyone. We meet new neighbors who have recently moved on the block. This year a large topic of conversation was about sharing how much damage each of us had in our basements from the heavy rains and flash flooding that happened a few days before. And we all discuss how lucky we all are because so many in our city had it much worse.



As the adults talk, the kids play.



Barricades that have been put up for the parade stay up and this becomes the one day of the year that the little kids can ride their bikes and play in the street. Water balloon fights, slip-n-slide, and basketball games happen throughout the day. The last couple of years we have had a pinata. One year we even had a dunk tank!



Later in the day we have a second round of food and everyone eats too much for the second time in the day. Fun for all. Memories made. It is a great day and I look forward to it each year.



Wealth is not just about money. THIS is also wealth!



Relationships are wealth!



Why do some of the poorest places on earth seem to have some of the happiest people? I believe it is because of relationships and community. As they say, “you can’t take your money and stuff with you…” But your relationships you had and the memories you had together will carry on even when you are gone from this world.



Unfortunately, our neighborhood is unique in our country. I don’t think it used to be. But today, many don’t know their neighbors. If you have a block like mine, cherish it… I sure do. And do whatever you can to keep it going.



I take comfort in knowing that if I became completely broke tomorrow, I would still be wealthy. I have a strong church community, a great neighborhood, close friends, and a close-knit extended family.



This type of wealth is more important than monetary wealth; not even close.



When you plan your finances, don’t forget to also plan ways to build relationships and community. To connect with people. To help others.



Stuff you can’t take with you. But relationships, the memories you create, and the impact you make, will live on and on.



Spending Problem? Try This!

Recently, I was taking in some content by an expert in psychology and money, Brad Klontz.  He studies how people make money decisions and the emotional barriers that exist to making good decisions.



One of his tips to help people spend less money was to put a note in your cell phone that would have the following questions:



  1. Do I really need this?

  2. Do I have room for this?

  3. What if I wait to buy this?

  4. How will I feel tomorrow if I buy this?



He suggested every time you are about to make a purchase you take your phone out, look at and answer each question before you buy the item.  If you still think you need/want to buy it, then buy it tomorrow instead of today.



We all know people who have major difficulties spending too much.  This might even be you! As I discuss money with people one of the most common things people say to me is how they struggle with shopping and/or over spending.



Trying to use willpower sometimes isn’t enough.  Our emotions get in the way.



Having spending rules and systems can keep these emotions in check.



This is why I have been a long advocate for the 24-hour rule for large purchases.  If it is a good buy, it will be a good buy tomorrow. If it is not a good buy, you give your rational part of the brain time to think instead of just letting your emotional part of the brain be in complete control in the moment.



This additional action of answering these questions forces your rational brain to get involved in the decision.  It might be just what you need to avoid making a spending mistake you will regret.



Our emotions get involved in our financial decisions all of the time.  In many ways we are hardwired to do things wrong. Having rules or a systematic way of making choices can help improve our chances of keeping us on the financial track we want to be on.



My District Just Offered an Early Retirement Package… Now What?

“I am getting out of here as fast as I can.”  


This is what a friend of mine had said for the past ten years.  But, now the reality has hit. He is eligible to take IPERS (his pension plan) and his school district has offered a generous early retirement package.  He can finally do what he has said he would do all these years.


But now he is having second thoughts.


He still loves what he does and is not sure what the next stage of life would look like.  Maybe you are in this situation as well. What should you do?



The Early Retirement Package


School districts have a monetary incentive to get their more seasoned teachers to leave the district. They can hire a younger replacement for much cheaper savings thousands of dollars per year. Some districts attempt to quicken the decision by offering an early retirement package.


The specifics of this incentive vary from district to district but they usually have one or more of the following components:


  • Access to district health insurance for a period of years.

  • A cash payment usually based on salary or amount of years worked in the district.

  • A cash payment for sick days accumulated.



If you are eligible for these benefits it can bring a lot of anxiety as you begin to ask yourself, is

this something I should be thinking about? This, of course, is a major decision that should not be taken lightly.


Below are some things to think about as you consider the specific offer on the table:



What will you do next?


Whether you are going to completely stop working, enter the substitute teaching pool, or do something entirely different, one thing is for sure:


Change is not easy.


Many of you have been in education for many, many years. Teaching may be your main

identity. Giving that up may have some emotional consequences. It will definitely be different.


Reflecting on whether you are prepared for what you will be doing next and whether you will be happy as a result is important.


There are many examples of people not knowing what to do when they retire. Some are miserable. Some have difficulty staying active and their health declines. Many have a difficult time finding meaning in their life.


It is worth taking time to address important considerations:


  • What your lifestyle will be like.

  • What you will do with your time.

  • The hobbies you will have.

  • The potential activities that will motivate you.


The best way I have heard it asked… “What are you retiring to?”


Retiring to an activity or job is typically a better scenario than just retiring to get away from the day to day grind of the classroom.



How will you pay for health insurance?


This is a major consideration for anyone under age 65, the age when you become eligible for

Medicare. Health insurance costs continue to rise and this can be quite a burden. Depending

on your age, this may be an issue to deal with for many years.


If you are close to 65, COBRA may get you to Medicare.  This will give you access to the district’s health insurance policy for up to 18 months.  This option can be costly because you will most likely have to make the entire premium payment each month, both what you have been paying as well as the amount paid by your school district.


Another option is the health exchange (www.healthcare.gov).  Because you would be changing status from employed to retired, you would be eligible for coverage in the plans listed.  


If you are married, going on your spouse’s health plan with their employer may solve the problem.  This may be temporary depending on the age of your spouse and when they plan to retire so that should also be considered.

 


What will be your pension income?


Most of the time a teacher taking an early retirement package will begin taking their monthly

benefit from a pension. It is important to know exactly what the income would be if the decision

is made to take pension income.  Your pension provider can run you an estimate to give you good numbers to work with.  


Compare the the numbers of retiring today to retiring in later years.  It is possible that waiting another year or two will drastically change your financial situation.  


In Iowa, where I live, it is important that teachers know that IPERS benefits are not inflation

adjusted over time. Once you start those monthly benefit checks, the amount will not go up, but

costs surely will.  Every year you receive the same amount of money but your check will buy less and less!


Another reason to get an estimate from your pension plan is because you most likely will have some choices of how to take your benefit. (single annuity, joint annuity, etc.) Work with your financial planner to help you determine what is the best for your particular situation.  


What is your plan for taking Social Security benefits?


If you are going to make a major decision affecting your retirement you will want to map out your

whole retirement situation. I like to think of it as a puzzle. There are many different pieces that you need to figure out how they all fit together.


Here are just a few of the pieces to identify and think about:


  • Other sources of retirement income you have.

  • Which accounts will be withdrawn first.

  • How personal savings should be invested.

  • When Social Security benefits should be taken.

  • Tax considerations.


You do not have to take social security when you leave your job.  You can delay it until age 70 or take it as early as age 62. There is a major difference in monthly payments based on when you do start taking the benefit.  


Social Security benefits are based on a 35 year history of work or a spouse's work history.  So working 1-2 extra years will not typically change the payout much. But delaying the benefit will.  


There are great reasons to delay, but your whole retirement situation should be taken into consideration.


Make sure you have good reasons for taking Social Security in whatever time frame you plan.

If you are married, Social Security should be a decision that is made with the household in mind,

not just you as an individual. What your spouse does may have huge impact on you as well.  Especially after one of you dies.



Your unique situation


As you can see there are many things to consider. Your situation is unique compared to others

so make sure you take your specific situation into account as you look at this. I have only

outlined some of the issues that could be involved.


I know of retired teachers who are loving their post-teaching lives. Some even wish they would have done it a couple years prior when given the first opportunity. On the other hand, I know of others who wish they were still back in the classroom for various reasons.  And still others who probably shouldn’t have made the jump, based on their finances. Because there is a lot to think about, make sure you look at the whole picture.


I wish you luck as you consider this choice, and am happy to help walk you through the choices.


Do You Have a Giving Goal?

I just set some goals for the year.  Career goals, health goals, relationship goals, and of course financial goals.  


When it comes to setting financial goals, often giving is an afterthought.  


Set a goal for giving

I believe giving should be focused on throughout one’s life, not just at the end.  Instead of giving when we have a little extra laying around, shouldn’t it be a priority that we plan for?

Saving 10%-15% for retirement is often a stated goal. Why not have a similar giving goal?


What is your goal for giving?  Examples may include:


  • Give ____% of my income.

  • Give $____ away every week.

  • Help ______________ charity by volunteering _____ hours per month.


Notice this can be a monetary goal or a time goal.  Just like every goal, keeping track of it is important.  You can monitor yourself and measure whether you are actually achieving the standards that you set for yourself.


Incremental Growth is your Friend

Some would love to give 10% of their income away every month.  But that may be difficult because of their current financial challenges.  Don’t let that stop you from improving your current giving situation.


It is okay to start slow.  The key is to start! Maybe 1-2% of your income is a realistic goal.  Then you can work to increase it every year.


With our clients who are not saving enough we try to help them set a mindset of incremental growth.  For example, they may only be saving 3% in their retirement plan now, but if they increase it by 1-2% each year they can get to their goal of 15% in less than 10 years.  Many times this can be implemented when they get a raise in income so that the pain is minimized and the success rate increases. This type of plan is better than going 10 years of not changing things because they never get to the point where they feel they can afford to save more.


Why not take this idea and implement it with your giving?


Steps to implement

Step 1: Find out what you are currently giving.  Try and figure out a percent of your income.  If you don’t have good records, promise yourself to keep track from now on and go onto the next step.


Step 2: Set a giving goal.  (i.e. “10% of our income”)


Step 3: Put together a realistic plan to get from where you are at and to your goal.  Use incremental growth of at least 1% increase per year, if needed.


Step 4: Create a system to track your progress.  Then monitor that progress over time.



Some say the best way to understand a person’s priorities in life is to look at how they spend their time and money. Most of us want to help others more. Create a goal for yourself today!


The First Day of School

Today is the first day of school.  It is also the first time in 17 years that I will not be starting the day in front of a class full of high school seniors.

 

I have mixed emotions.

 

Even though I have been working through the summer as a full-time financial planner, today is the first time it has really hit me that I will no longer be teaching in the classroom.  I knew it would be weird as school started but I guess it is natural to be grieving a bit.

 

The first day has a special energy to it.  I am imagining myself in my classroom teaching my first lesson to a group not quite ready to be there.  My goal is to have them say, “Econ may not be that bad after all!” and have them understand why studying economics is important. You put yourself out there in front of 30 students six times throughout the day.  They get a chance to know you for the first time and you get to begin the process of getting to know them. Each class period has their own unique personality. It will evolve over time but you begin to see glimpses of what it will be that first day.

 

I loved teaching.

I loved the challenge of getting students to enjoy economics.

I enjoyed getting to know all of my students on a personal level.

I cherished the bond of friendships with my teaching colleagues.

I definitely loved the chance to help around 300 high school seniors each year learn the knowledge and skills needed to become financially successful in this world we live in.  This was my passion.

 

That is why it was a tough decision to make.  But I had a second passion as well.

 

As a financial planner, I am still teaching.  I teach individuals and couples in an intimate setting as I walk with them on their financial journey.  I have even had the opportunity to teach other teachers about their financial opportunities at a couple of conferences and during a 2-day class.  I hope to do more of this.

 

I have no regrets.  This job is awesome too!

 

Just yesterday, I was at a coffee shop working, when someone came up and said hello.  It happened to be a former student of mine who graduated about ten years ago. He has gone through some tough times over the years and is beginning to turn his life around.  Because of this past, his finances are a mess.

 

In about 30 minutes I was able to hear his story and give him some quick thoughts on a few next steps he can take to move forward toward a stronger financial footing. I gave him some resources to check out on his own to help him along the way.  We agreed to stay in touch.


I also think about the impact I have had on the clients I have worked with over the 4 years I have done this part-time.  Just like teaching, the ability to make a difference in people’s lives is tremendous.

 

But I will definitely miss being a classroom teacher.

 

Thank you teachers and others who work in our schools for doing your best each day to make a difference for your students and our future.  Have a great year!

Student Loan Forgiveness for Teachers

Even though I frequently get questions from teachers about student loan forgiveness programs, there are still many who don’t know that forgiveness and cancellation options exist.  In fact, some of these programs were set up specifically for teachers.

 

Those that do know that programs exist, can quickly get overwhelmed by the different plans and how to decide which, if any, would be the most appropriate for them.  In this post, I tried to organize the different plans so that you can quickly figure out if they may be an option for you.

 

First, I should note that private student loans are not eligible for these forgiveness programs.  If you are struggling with these type of loans you will have to call the lender directly and see if they will work with you.  Also, it is important to understand that if you consolidate your federal (public) student loans into a private loan, most likely you will lose eligibility for these and any future forgiveness options.  If you are unsure about the different types of student loans, HERE is a primer.

 

Here is a look at the available ways that teachers can potentially get student loans forgiven.

 

Income Based Payment Plans

 

When you begin paying back your federal student loans you will choose a payment plan option.  You can choose the standard 10-year plan, graduated plan, extended plan, or an income-based option.  People struggle with what is the best option for them.

 

Income-based options come with a potential added benefit of forgiving any balances that remain after a certain amount of years.  This can greatly help those with low incomes or very high loan balances.

 

The government keeps adding income-based plans so it can become confusing pretty fast.  Currently, there are 4 income-based plans that can end up in student loan forgiveness: IBR, PAYE, RePAYE, and ICR.  Here is a quick rundown of each plan:

 

Income-Based Repayment Plan (IBR)

 

  • For loans issued before July 1, 2014:

    • Payment max of 15% of your discretionary income.

    • Remaining loan balance is forgiven after 25 years of payments.

  • For loans issued after July 1, 2014:

    • Payment max of 10% of your discretionary income.

    • Remaining loan balance is forgiven after 20 years of payments.

  • If any amount is forgiven it will be considered income on that year’s tax return.


 

Pay As You Earn Repayment Plan (PAYE)

 

  • For direct borrowers, if received disbursement on or after Oct. 1, 2011.

  • Payment max of 10% of your discretionary income.

  • Remaining loan balance is forgiven after 20 years of payments.

  • If any amount is forgiven it will be considered income on that year’s tax return.


 

Revised Pay As You Earn Repayment Plan (RePAYE)

 

  • For all direct borrowers no matter when the loan was taken out.

  • Payment max of 10% of your discretionary income.

  • Remaining loan balance is forgiven after 20 years of payments. (if all loans for undergrad)

  • Remaining loan balance is forgiven after 25 years of payments. (if ANY loans for graduate or professional)

  • If any amount is forgiven it will be considered income on that year’s tax return.

 

Income Contingent Repayment Plan (ICR)

 

  • All direct borrowers qualify.

  • Payments will be lesser of:

    • 20% of your discretionary income.

    • The equivalent of a fixed payment plan of 12 years, adjusted to your income.

  • Remaining loan balance is forgiven after 25 years of payments.

  • If any amount is forgiven it will be considered income on that year’s tax return.

  • Parent borrowers can use this plan if they first consolidate their parent PLUS loans into a Direct Consolidation Loan.


 

*You must recertify your income and family size each and every year for these options.  These changes may cause monthly payments to increase or decrease from year to year. It is in your best interest to remember to do this (they do send reminders).  If you neglect to do this, negative consequences can include a sharp increase in monthly payment or disqualification of the program.

 

Public Service Loan Forgiveness (PSLF)

 

Many teachers are eligible for a program for public service workers because they work in a public school setting.  Private school teachers may be eligible depending on the circumstances. For many, this will be the best program among the bunch because it is a ten-year payment timeline (instead of 20 or 25) and the borrower doesn’t have to report any forgiven balances as income on their taxes.

 

  • Must be using one of the income-based repayment plans (see above)

  • Must be a full-time employee. (at least 30 hours per week)

    • Must work for a public service employer:

      • Government organization (federal, state, local, or tribal).

      • Not-for-profits under Section 501(c)(3) IRS tax code.

      • Other types of non-profits.

  • Must have a Federal Direct student loan

    • Family Education Loans (FFEL) and/or Federal Perkins Loans must first be consolidated to a Direct Consolidation Loan in order to be eligible

  • Remaining loan balance is forgiven after 10 years of payments.

    • Eligible payments are ones made after Oct.1, 2007.

  • Any amount forgiven will NOT be counted towards income.


 

Teacher Loan Forgiveness Program

 

This program is for teachers that serve low-income students and/or specific subjects of need.

 

  • Eligibility:

  • Maximum forgiveness amount either $17,500 or $5,000, depending on the subject taught.

    • Up to $17,500 if math or science at the secondary school level

    • Up to $17,500 if special education teacher (elementary or secondary)

    • Up to $5,000 if none of the above.

  • Any amount forgiven will NOT be counted towards income.

 

Perkins Loan Cancellation for Teachers

 

If a teacher has outstanding Perkins Loans (which are need-based student loans) they can get up to 100% of the principal balance cancelled after five years.


 

  • Eligibility

    • Full-time teacher in public school or nonprofit school system and one of the following:

      • Teacher in a school serving low-income families.

      • Special education teacher

      • Teacher of math, science, foreign languages, bilingual education, or shortage area determined by your state education agency.

  • Cancel up to 100% of a Federal Perkins Loan.

    • 15% cancelled for the 1st year

    • 15% cancelled for the 2nd year

    • 20% cancelled for the 3rd year

    • 20% cancelled for the 4th year

    • 30% cancelled for the 5th year

  • Any amount forgiven will NOT be counted towards income.

 

State Programs

 

Some states have additional loan forgiveness programs for teachers and others.  The easiest way to find this is to just Google “teacher forgiveness your state”

 

For example in Iowa, where I live, the state has the Iowa Scholar Program:

 

Teach Iowa Scholar Program (TIS)

 

  • Eligibility:

    • Graduate on/after January 1, 2013.

    • Graduate in the top 25% academically of your teaching program.

    • Full-time employment in Iowa in a designated shortage area.

  • Can receive up to $4,000 per year for up to 5 consecutive years.

 

Summary

 

Deciding how to pay back student loans can be difficult and confusing.  Just getting the correct information can be a time-consuming process.

 

The student loan landscape is constantly changing.  Programs have been added over recent years and more could be added in the future.  Sometimes states add and drop programs depending on funding available or the political landscape.  Some workplaces are now recognizing that student loans are an issue for their workers and are offering to pay back loans for their employees over time.  Additionally, the current Trump administration has hinted at changing and/or dropping some of the federal programs outlined above.

 

I would also add that for many just paying your student loans down as fast as possible can be the simplest and best solution even if you are eligible for forgiveness programs.  (Check THIS story out for some motivation!)

 

Everyone is unique.  What is best for one person may be a bad option for another.  Looking at your whole financial picture is important when making this decision.  Considering the following may help you decide what is best for your specific case:

 

  • Current income.

  • Potential income growth.

  • Your comfort level of taxpayers potentially paying your loan forgiven amount.

  • Other debt obligations.

  • The political climate and possible changes to these programs.

  • Tax considerations.

  • Your tolerance of having debt.

 

If you would like help going through this process to make the best decision for your situation let us know HERE.

Renew, Relax, Recenter

My wife and I just did an amazing thing.  We spent Friday evening through Sunday afternoon alone... without kids!  

 

A couple of months ago I was listening to a podcast and someone being interviewed mentioned that a key ingredient to success is finding time for focused planning.  He said that so many spend too much time IN their business and not enough time ON their business.

 

I have heard this many times before in different ways but it really hit me this time.  It describes my current life to a tee. It is so easy to spend time IN our busy lives that we neglect to work ON our lives.  My wife and I have difficulty getting enough exercise, getting enough sleep, and staying on top of things in our crazy lives.  Even though we know better, it is so hard to change our patterns because we are in what seems like survival mode most of the time.

 

So we made a commitment to spend a weekend focusing ON our lives.

 

We reserved a hotel in our city for two nights.  And with the help of my wonderful mother-in-law who watched our four kids, we were able to spend time away to recharge and recommit to the things that matter most to us.  

 

The goal was to concentrate on some of the big picture items in our lives:

 

Our finances

Our health

Our marriage

Our parenting

Our daily routines

 

It was exactly what the doctor ordered.  Here are some brief examples of things we accomplished during our planning session:

 

  • We talked about what is truly most important to us and how we want to live our lives.

  • We discussed our finances and made some changes in the roles we will play in our money management.  

  • We created some specific financial goals.

  • We discussed my wife’s business and how to make it even better.

  • We committed to getting some additional exercise and made a plan of how we could realistically achieve those commitments.

  • We made some plans how to eat healthier family meals.

  • We planned out our 18-day national park vacation we are taking this summer.

  • We talked about what our life will be like when I am no longer a teacher at the end of this year and go full-time as a financial planner.

  • We ate out three times over the weekend!  Did I mention there were no kids?

  • We identified some strategies and routines so that we and our children can lower the amount of time with our phones or electronic devices and spend more time reading books.

 

This was time and money so well spent.  We feel like we are in control again!

 

We know it won’t be easy to accomplish all of the things we are trying to do and the changes we will make, but we are very excited to do our best to execute our plan.  

 

Everyone should do something like this.

 

Would you benefit from taking a weekend to plan out your life?

Are you in need of new commitments and change?

Do your routines need a revamp?

How much anxiety would be lowered if you worked on your finances?

 

If this sounds like something you need.  Take the leap and schedule it today!  Find a way to get rid of all the obstacles and reasons you couldn’t possibly do something like this that I’m sure you are thinking about right now.  You will not be sorry!

Types of Student Loans - An Overview

Student loans can be confusing.  Whether you are looking into getting loans for the first time or trying to identify the type of loans you already have, I hope this guide will be helpful to you.  There are two types of student loans: federal (public) loans and private loans.

 

Federal Student Loans

 

A student must complete the Free Application for Federal Student Aid (FAFSA) form to determine eligibility for the following loan programs.  This application will also determine potential eligibility for grants and work-study programs.  In addition, many schools use this to help them determine who will get financial aid directly from their institution.  Below are brief outlines of the different types of federal student loans:

 

Direct Subsidized (Stafford) Loans

 

  • Must show financial need.

  • For undergraduate degrees.

  • The government will pay (subsidize) the interest while still in school.

  • U.S. Department of Education is the lender.

  • Maximum amounts:

    • $5,500 for 1st year undergraduate (up to $3,500 can be unsubsidized).

    • $6,500 for 2nd year undergraduate (up to $4,500 can be unsubsidized).

    • $7,500 for 3rd year undergraduate and after (up to $5,500 can be unsubsidized).

  • Maximum Aggregate limits:

    • $31,000 (up to $23,000 can be unsubsidized).

  • Interest rates are set by Congress.  See HERE for current and past rates.


 

Direct Unsubsidized (Stafford) Loans

 

  • No financial need necessary (i.e. Bill Gates’ children would be eligible).

  • For undergraduate, graduate, or professional degrees.

  • Interest will accrue while still in school.  Student likely does not have to pay interest while in school, although they can choose to do so.

  • U.S. Department of Education is the lender.

  • Maximum amount (see above, as explained with subsidized loans).

  • Interest rates are set by Congress.  See HERE for current and past rates.


 

Direct (Parent) PLUS Loans

 

  • For parents of dependent children.

  • Also for graduate, or professional degree students.

  • No financial need necessary.

  • The borrower must NOT have adverse credit.

  • U.S. Department of Education is the lender.

  • The maximum amount is the cost of attendance (minus any other financial aid received).

  • Interest rates are set by Congress.  See HERE for current and past rates.

 

Perkins Loan Program

 

  • Must show financial need.

  • For undergraduate, graduate, or professional degrees.

  • School is the lender.  Schools have limited funds to distribute.  Also, not all schools participate in this program.

  • Maximum Amounts:

    • $5,500 per year for undergraduate degrees.

    • $8,000 per year for graduate or professional degrees.

  • Maximum Aggregate amounts:

    • $27,500 for undergraduate degree.

    • $60,000 for graduate degree (includes the amount as an undergraduate).

  • Interest rates are set by Congress.  See HERE for current and past rates.


 

Private Student Loans

 

These loans are made directly from a lender, such as a bank, credit union, state agency, or school.  Typically private loans are used when a student doesn’t have enough to pay for their schooling after considering the federal loan programs for which they are eligible.

 

These loans can vary greatly from each institution but generally, they have the following characteristics:

 

  • May require payment while still in school.

  • The borrower may need a cosigner.

  • Can have variable interest rates.

  • May require a credit check which can determine interest rates and terms.

  • May not offer forbearance and/or deferment during financial hardship like federal loans.

  • Can often borrow up to the cost of attendance, if approved.


 

Generally, federal (public) student loans are better than private student loans, for all kinds of reasons.  So it is usually wise to exhaust federal loan options before getting private debt.

 

If you would like help making good decisions of how to pay for college or the best way to pay back student loans please let us know.  

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