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Money Rules for Back to School

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Now that you’re settling in for the new term, it’s a great time to review your cash flow and make a plan to get through the semester on a full tank. Here are some tips for a smooth ride!

Review your financial aid package

Make sure you understand the difference between grants, which you don’t have to pay back, and loans, which you DO have to pay back—even if you don’t complete your degree. Make sure you are borrowing only what you need to cover tuition, fees and essential living expenses.

Figure out your income for the semester

Add up your summer earnings and any grant, scholarship and/or student loan funds you may receive as a refund after your required tuition and fee bill has been paid. If you will be working during the semester, multiply your estimated take-home pay for each month by the number of months in the semester (e.g., September through December = 4) and add that amount to your previous total—that’s what you have to live on for the semester. It may seem like a lot of money, but it will go quickly if you’re not careful with your spendingHere’s a tip: To make your summer earnings last for the entire school year, divide them by two and set one half aside.

Develop a spending plan

The very idea of budgeting probably makes your eyes glaze over, but it is one of the most important exercises you can undertake to put yourself on a solid financial footing. Creating a simple monthly plan will let you see where your money goes—monthly bills such as rent, car insurance, internet or cell phone — and how much you may have left over for miscellaneous expenses such as food and entertainment.

Use a budget worksheet to make the process easier, and be sure to check it often during the semester and make adjustments as needed. If you’re not sure how you have been spending your money, go through your bank statements, bills and other receipts for the last three to four months and tally up the totals in each category (restaurants, entertainment, coffee, bills, etc.). You’ll be amazed at some of things you’re spending money on and how quickly small amounts add up!

Plug the leaks

As you review your expenses, identify those things that you really could have done without. Ask yourself questions such as:

  •  What do I spend money on that I don’t really need?
  • Are there ways to reduce my fixed expenses, such as rent or cell phone charges?
  • Can I reduce the amount I spend on groceries without sacrificing good nutrition?

This will help you understand your priorities and clarify needs versus wants.

Set aside funds for emergencies

You never know when life is going to get in the way, so it’s important to have some funds on tap for an emergency. Unexpected expenses such as home or car repair can easily crop up, and the last thing you want to do is rely on credit cards or additional loans to bail you out. While most financial planners recommend an amount equal to three to six months of your living expenses, this may not be realistic for most college students. The key is to start small. If you’re receiving a financial aid refund, for example, plan to set aside a few hundred dollars and make a pledge not to spend it.

Be careful with credit!

If you have a credit card (or several), only charge what you know you can pay off each month. If you are commuting to school and charging your gas, for example, make sure you include the estimated cost in your budget so you have enough each month to pay off the total bill and avoid interest charges. Whenever possible, avoid making large purchases—such as a new computer or TV—with credit. Instead, set aside money until you have enough to pay cash.

Remember, it’s about finding the right balance between what you want and what you can reasonably afford. Every small sacrifice will help develop good money habits and pay off big time in the long run!

 

 

Ash Exantus aka Ash Cash is one of the nation’s top personal finance experts. Dubbed as the Financial Motivator, he uses a culturally responsive approach in teaching financial literacy. He is the Head of Financial Education at BankMobile and Editor-in-Chief at Paradigm Money. The views and opinions expressed are those of Ash Cash and not the views of BankMobile and/or its affiliates.

Digm Piece (Op-Ed)

5 Hidden Risks in Retirement That Could Affect Your Financial Security

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Being well-prepared for retirement is wonderful, but there is no fail-safe plan. Things can unravel due to many inherent post-retirement risks. Understanding those risks that lie ahead and how they can harm financial security is key to making critical adjustments in a retirement plan. Sometimes without those changes, the impact of unfavorable and unpredictable events can be far more severe.

“Once you have a retirement plan in place, it’s not set in stone,” says Clayton Alexander (www.retireteton.com), an investment adviser and founder of Teton Wealth Group. “Things change. You may add or lose family members, your retirement goals may change, the economic environment may create new considerations, and financial innovations may present new strategies. Once per year is a minimum in terms of making sure your retirement plans (and beneficiaries) are constantly up-to-date.”

Alexander says retirees and those making retirement plans should be aware of these five risks:  

  • Longevity. Running out of money before they die is one of the primary concerns of most retirees. This worry is heightened by the fact that the average life expectancy has increased. “A pension or an annuity can lessen the risk, but carefully investigate any company where you’d place an annuity and be cautious of fees and interest rates,” Alexander says. “It’s best to tailor your plan to run to life expectancy plus five years.”
  • Loss of income. “Make sure both you and your spouse are protected from the unexpected,” Alexander says. “Consider the financial impact of the loss of one spouse. Remember that your surviving spouse will only get the highest of your two Social Security checks. A spouse’s death can bring additional financial burdens, including lingering medical bills and debts. Life insurance and estate planning are important vehicles to protect survivors.”
  • Health care costs. Longer life expectancy could lead to high costs in a long-term care facility. “It’s estimated that approximately 50% of people over 65 will need long-term care,” Alexander says. “Do not overspend on policies that may be subject to drastic premium increases. And surprising to some, Medicare is not free — your premiums for coverage are usually deducted from your Social Security check. Medicare doesn’t cover dental, hearing or vision, is subject to deductibles, and doesn’t cover long-term care. Long-term care insurance is advisable.”
  • Negative return risk. “A 50% gain does not allow a portfolio to recover from a 50% loss,” Alexander says. “In fact, a 100% gain is required to restore a 50% loss. The ‘buy and hold’ strategy that works when you are young — where you wait for the markets to come back up after a downturn — does not apply in retirement as we saw in 2008, when many people’s retirements were wiped out. Common stocks have substantially out-performed other investments over time and thus are usually recommended for retirees as part of a balanced asset allocation strategy, but the rate of return you earn can be significantly lower than the long-term trends.”
  • Inflation risk. “You should plan on prices for food, goods and services getting higher during retirement, reducing your buying power incrementally as you are living on a fixed income,” Alexander says. “Your retirement plan has to factor that in. Ways retirees can curb the effects of inflation include annuity products with a cost-of-living adjustment feature and investing in equities, a home, and other assets.”

“Understanding what the potential post-retirement risks are and considering them in the retirement planning stage,” Alexander says, “can help to ensure that they are mitigated and properly managed.”  

About Clayton Alexander Clayton Alexander (www.retireteton.com) is an investment adviser and founder of Teton Wealth Group. A graduate of Dixie State University with a B.A. in administration, Alexander also worked at Northwestern Mutual and Goldman Sachs. He is licensed for life and health insurance in the state of Utah and has passed the Series 65 securities exam. Alexander focuses on building holistic retirement plans, and with the launch of Teton Wealth he developed the four-step Ascent Plan – a system to help clients gain clarity and perspective on creating a financial plan for safe, secure and tax-efficient retirement income and estate transition.  

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Digm Piece (Op-Ed)

Are Americans Undervaluing Paid Time off + Quick Trip Tips

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It’s August, which for many Europeans means taking almost the entire month off. So why is it difficult for Americans to take even the little vacation time they receive? A recent piece in The Economist states workers in the U.S. are doing it all wrong by going on short holidays, which can add even more stress or taking none. Instead, it’s essential for employees to recharge their batteries. It’s also beneficial for companies to have a consistent holiday month during which junior employees can head to the beach, and managers can take stock of things, says the report.

While many Americans may not receive paid time off, especially those that only work part-time, even those who receive it generally don’t take all of it. What we don’t realize is that not taking a vacation is like giving money back to your employer, especially with companies that have a use it or lose it policy. Which should encourage employees to use their time but unfortunately it does not. According to recent polls conducted by Bankrate, nearly 2600 US adults say they plan to take a quarter of their vacation days while 4% are not planning to take any vacation time at all.

Time off is a valuable perk, to the tune of millions of dollars! Just to bring the point home in 2017 Americans gave up 212 million days off that amounts to $62.2 billion in lost benefits! So, take your vacations and follow the tips below to not break the bank while taking time off:

  1. Take a Staycation – Stay local and vacation somewhere that is less than a day drive away, this helps save gas, mileage, and spending on lodging. Look for local attractions, vineyards, interesting museums and landmarks or even travel to your closest big city and be a tourist for a day. You would be amazed at how much you can discover and learn by staying local and all on the cheap! It’s a bonus if you have friends in the town your visiting they can serve as a tour guide and let you stay over for free if they have the room.
  2. Book Flights Off-Season – July 4th, Memorial Day and Labor Day seem like a great time to go on vacation; unfortunately, everyone is planning to take time off during those busy weekends, and ticket prices are through the roof because of it. Book flights after major holidays and during the week you will generally find that they are cheaper than weekend flights.
  3. Take a Road Trip – Road trips are fun and cheaper than taking a plane, especially if you must rent a car when you get to your destination anyway. Plan cool stops along the way and finds interesting places to eat that way you can make the journey part of the vacation.
  4. Plan to Eat In – Food adds up on vacation so pack food and making one or two meals in your hotel can keep you under budget.
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Digm Piece (Op-Ed)

Top Ten Freshman Money Myths

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Starting college is one of the most important and exciting times of your life. Now that you’re all “checked-in,” enjoy your college experience without worrying about where your next meal will come from by chasing away these common freshman money myths. (more…)

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