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11 Superb Student Loan Debt Hacks

11 Superb Student Loan Debt Hacks

Blink.

Did that take the better part of a second? There, student loan debt just grew by $2,726. According to Marketwatch, that around three-thousand dollar number, accumulating every second, is part of about $1.3 trillion dollars graduates now owe for their college educations.

The debt can be a lifelong leech. What would life be like without it? This is the question millions of people are asking. We pursue a career because we’re passionate about something. But plenty of us also pursue a career, and get a degree, because we want to make good money. Paradoxically, this pursuit of good money means we owe more than ever before.

Don’t despair. This is a chance to tackle a very real problem, a problem shared by 40 million Americans and counting. You’re not alone here. Plenty of us feel this is out of control. Think of taking control as a continuing education process. You’ve got to own the debt, corral it, and work with it until it’s out of your life.

1. Organize daily finances

It will be easier to sort this out if all of your daily finances are in order. Here are the steps:

Organize by using free services – Mint and Personal Capital are both tools for putting all of your accounts, including bank accounts, investment accounts, and student loan accounts, onto a single dashboard where you can see them

Do autopay – Your budget should be setup so your loan repayment is part of basic expenses that don’t change; tell your bank to autopay basic expenses online each month and make sure you deposit enough from each check to cover the autopayment. Setup overdraft protection in case something goes wrong, set up auto-debit directly with your lender, and receive a twenty-five cent discount on your interest payment

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Audit yourself – At tax time each year, check your accounts thoroughly to make sure nothing is amiss

2. Look into loan forgiveness

You may be eligible for loan forgiveness. Here are the types:

Public Service Loan Forgiveness – To qualify for PSLF, you must work for a non-profit, the government, or “a private company that provides public services”; also, your loan has to be from the federal Direct Loan Program, and you have to have already made 120 payments; check out the hack on income-based payment plans for info on how you can pay nothing per month but have it qualify as payment

State forgiveness – 45 states offer forgiveness; the majority of these programs also require you to have a job in public service. Go here to find information state-by-state

Perkins Loan cancellation – This also applies to public service individuals who received a Perkins Loan; in particular, teachers who work in any of the teacher shortage areas, or at low-income schools, qualify. For the full list on who’s eligible and the amount that could be forgiven, go here.

Military Forgiveness – Military personnel qualify for the PSLF, the Perkins cancellation, the National Defense Student Loan Discharge, and the Veteran’s Total and Permanent Disability (TPD) Discharge, as well as a number of deferments and repayment programs

3. Check out a DIY payment guide

This guide offers advice on the following:

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Why making larger payments makes sense – simply paying $200 more than the minimum payment per month saves you $2,400 on interest, and you pay off the loan 4 years earlier

The value of the right mindset – listing the reasons why you want to live frugally, in order to pay off your debt quickly, will help prepare you for the challenge of tightening the belt

How to create a spending plan – looking at your last three months of bank statements will help give you an idea of your average expenses

How to track spending – you can create a spreadsheet with each expenditure listed, and phone- reminders of when to make payments

Creating an emergency fund – start with $1000 and then try to save 3 to 6 months’ worth of expenses

Taking on an extra gig – the gig economy offers a ton of options, such as driving for Uber, and according to Fabio Rosati of Upwork, this economy contributes “more than $700 billion to our national economy”. Why not take advantage of the options?

Creating your repayment plan – The National Student Loan Data System will pull up all your loan services, and from there you can decide on a “Snowball Method” or an “Avalanche Method” of repayment

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Looking at alternative repayment plans – Loan consolidation, deferment, and forbearance are all options available to you

Getting a support system – having someone there to keep you accountable is priceless

Rewarding yourself – finding small ways to do this will help keep you on the payment path; after all, man cannot live on bread alone

4. Look into income-based plans

In December of 2015 the federal Revised Pay As You Earn (REPAYE) program will go into effect. This program is more lenient than any of the income-based programs that have been available. Under this program, if you received a Direct Loan, you’ll pay no more than 10% of your discretionary income. “Discretionary” income is Adjusted Gross Income above 150% of the poverty level for your household.

If you absolutely have no job and no income, you’ll still qualify for this plan—unless you’ve defaulted on your loan. You could end up paying nothing per month if 10% of your income is nothing. But interest would still accrue.

You can also consolidate your Federal Family Education Loan (FFEL) and Perkins Loan into a Direct Consolidated Loan, which would then be eligible for REPAYE.

5. Look into consolidation  

A caveat: you can’t consolidate private and public loans. Consolidating your state and federal loans will allow you to pay less per month, but once again there’s the issue of interest adding up as you’re making minimum payments. Still, consolidation will simplify the situation, giving you one payment at a set interest rate. And thanks to REPAYE, that payment could be very low, which will help a great deal if you’re strapped for cash right now.

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6. Deduct your interest  

Look at the information your lender has sent you. Anything helps, and you can reduce your taxable income by up to $2,500 if you’ve been paying on the interest for your loans. If you qualify for deferment or forbearance (meaning you wouldn’t have to pay on the principal of your loan for a certain period of time), try scraping together money to pay on the interest, and then look into deducting what you pay from your taxes.

7. Volunteer for Zerobound

Here, you can sign up to volunteer and get crowdsourced money to go towards paying your student loans. SponsorChange is another site of this same nature. Make sure to familiarize yourself completely with these opportunities before you take them.

8. Volunteer elsewhere

AmeriCorps, VISTA (Volunteers In Service To America), Peace Corps, Teach for America, and National Health Service Corps offer forms of student loan forgiveness or reimbursements.

9. Try a student-friendly cash-back credit card

Be careful with a credit card; it’s the same as taking on more loans. But if you are confident in your budgeting skills, a card such as UPromise is specifically designed to give you good cash-back rewards from your purchases, which can then go directly toward paying off your debt. You’re going to be making purchases anyhow, and this is a chance to make money from them. But you have to be highly disciplined.

10. Consider refinancing

Right now this will lower your interest rate. But once again, be careful. Refinancing will put you in private loan territory, where none of the options (listed above) for a federal or state loan apply. Don’t refinance unless you’ve got a good job, are sure you can meet the principal on your loan, and are simply looking to pay less interest. But be aware that interest rate could go up.

11. Be aware of the discounts

There are direct-debit discounts, on-time payment discounts, graduation credits, and a degree of forgiveness available from certain lenders. The Department of Education also offers two types of discounts.  

Featured photo credit: Light brigading via flickr.com

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Dan Matthews, CPRP

A Certified Psychosocial Rehabilitation Practitioner with an extensive background working with clients on community-based rehabilitation.

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Published on May 7, 2019

How to Invest for Retirement (The Smart and Stress-Free Way)

How to Invest for Retirement (The Smart and Stress-Free Way)

When it comes to stocks, I bet you feel like you have no idea what you’re doing.

Everyone who’s not a financial expert has been there. I’ve been there. But, time is passing and you need to be crystal clear with how you’re investing for your retirement.

Otherwise, it’s back to work until you can afford not to. So, how can you invest for retirement when you’re not a financial expert?

You take the time to learn the fundamentals well. If you do, you can grow your wealth and retire happy. The best part is that you don’t need to be a financial expert to make smart investment decisions.

Here’s how to invest for retirement the smart and stress-free way:

1. Know Clearly Why You Invest

Odds are you already know why should invest for retirement.

But, maybe you know the wrong reasons. It’s time you get clear on why you’d like to retire. Here are some questions to help you get started:

  • Will you spend more time with your family?
  • What does retirement mean to you?
  • Are you looking to launch that business you’ve been holding off for years?

Everyone wants to retire but not for the same reasons. Once you’re clear for why retirement is important for you, you’ll focus on making it happen.

Investing in the stock market allows you to take advantage of compound interest.[1] All this means is that your money earns money on top of its interest. A reason why investment in the stock market is one of the best ways to plan for retirement.

2. Figure out When to Invest

“The best time to plant a tree was 20 years ago. The second best time is now.”– Chinese Proverb

It’s true if you’d had started investing when you were 10 years old, you’d have a lot more money than you do today.

The reality is that most people don’t start investing until it’s too late. So, if you’re currently waiting for the perfect time to start an investment, it would be today. Open your calendar and block out 2 to 3 hours to choose how you’ll invest for retirement.

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A quick way to get a snapshot of where you stand is to use Personal Capital. Input all your personal information and spend some time setting your retirement goals. Once completed, you’ll know where you stand with your retirement.

Having a savings account for retirement isn’t planning for retirement. Why? Your money loses value when you factor in US inflation.[2]

3. Evaluate Your Risk Tolerance to Create the Perfect Portfolio

Investing your money well depends on your emotions.

Why?

Because when the market drops most people panic and withdraw their money. On average, the US stock market yields an annual 6% to 7% ROI (return on your investment.) But, this won’t happen if you’re worried about short-term loses.

Before you invest your next dollar, know your risk tolerance.[3] Your risk tolerance determines the number of risky and safe investments you’d have.

Regardless of your investing style, you need to view investing for retirement as a long term game. Know that some years you’ll lose money but recoup this in the long-term.

Avoid watching market-related new. Also, create a double authentication to log in your investment account. This way you’re less likely to withdraw your money.

4. Open a Reliable Retirement Account

Depending on your circumstance, you may need to open a new brokerage account. This is the account is where you’ll invest your money.

If you’re currently working for a company, odds are that they offer a 410K investing account. If so, here’s where you’ll invest most of your money. The only problem with this is that you’re limited to the stock options that are available.

You do have the option to open a separate IRA (individual retirement account.) Here are some of the best brokers:

  1. Vanguard
  2. TD Ameritrade
  3. Charles Schwab

5. Challenge Yourself to Invest Consistently

Committing to invest for retirement is hard, but continuing to do so is harder.

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Once you’ve started investment for your retirement, you run at risk from stopping. Often you’ll want to contribute less, so you’d have more money in your pocket.

That’s why it’s important that you create a budget that allows you to invest each month. If you’re working for a company, you can set a percentage for the amount you’d like to contribute each month. Most people by default contribute 1% but aim to contribute 10% to 15%.

Be the judge for how much you can afford to contribute after covering important expenses. To stay motivated, use Personal Capital to view your net worth.

A benefit to contributing money to your retirement account is not taxed. For example, if you earn $100 and invest 10%, you’d contribute $10, then get taxed on the remaining $90. As of 2019, the most you’re able to contribute towards your 401K is 19K but this can change.

6. Consider Where to Invest Your Money

The most common way to invest your money is in stocks, but it’s not the only way. Here are other ways to invest:

Robo Advisors

Robo-advisors[4] are fancy algorithms that’ll choose the best investments for you. Sites like Wealthfront make it easy for first-time investors to invest their money. You’d input information about yourself and set your risk tolerance.

Then, set your monthly contribution amount and your robo-advisor would do the rest. Robo-advisors charge a fee to manage your money, but less than regular advisors.

Bonds

Think of bonds as “IOUs” to whomever you buy them from.

Essentially, you’re lending money and charging interest. Like stocks, not all bonds are equal. Some will be riskier than others depending on their rating.

Here are the different types of bond categories:[5]

  1. Treasury bonds
  2. Government bonds
  3. Corporate bonds
  4. Foreign bonds
  5. Mortgage-backed bonds
  6. Municipal bonds

Mutual Funds

Picture a group of people dumping all their money in a jar that’s managed by a professional. This is how mutual funds work. The fund manager manages the money looking to earn capital gains (interest.)

One of the best types of mutual funds is index funds. Since these funds don’t try to beat the market and instead follow it, they need less research. Because of this they often charge the lowest fees and yield the best long-term results.

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Real Estate

Yes, buying a home is an investment when done correctly.

Imagine buying a home and using it as a rental property. After repairing it, you receive a monthly surplus check of $100 to $200.

This may not sound like a lot, but repeat this process enough times and you’d earn a large amount of passive income. That’s why real estate is one of the best investments to not only retire but become wealthy.

But, it requires a lot of money to start and you should expect losing money along the way as you learn the process.

Savings Accounts

Your money can still grow in a savings account. Nowadays most online banks offer a 2% annual return. Although the average inflation is higher your money will be available when you need it.

7. Master Disincline to Dodge Short Success

Investing for retirement is a long-term strategy. That’s why you need to master delayed gratification. All this means is delaying short-term pleasure for something bigger in the future. Research shows that those who have delayed gratification are more successful.[6]

So how can you master delayed gratification?

By building your discipline.

Think back to what retirement means to you. A clear purpose will help you avoid withdrawing your money during a market downturn. It’ll help you contribute more towards retirement when you’d want to waste it instead.

Your journey towards retirement will be long, so reward yourself along the way. Choose a reward that’s relevant and meaningful, so that you reinforce positive behavior. For example, after contributing more towards retirement, treat yourself to dinner.

8. Aggressively Invest on This One Investment

I’ve mentioned several types of investments but haven’t covered the most important one.

It sounds cliche but here’s why you’re your best investment towards retirement. The more you know, the more money you’ll be able to make. The more good habits you adopt, the more secure your retirement will be.

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More importantly, investing in yourself is an investment that no one can take away. There’s no market downturn nor tragic circumstance that’ll wipe your knowledge and experience.

But, how can you invest yourself?

Reading books, blogs, and anything that’ll help you learn new topics daily. Listen to podcasts and audiobooks on your commute to/from work.

Save money to buy courses and hire coaches. I used to believe hiring coaches was a waste of money when I could learn the subject alone.

But, coaches see your blind spots and hold you accountable. Hiring the right coach will help you achieve your goals faster than you would’ve alone.

Retire Happy with Excess Money

The key to a secure financial future doesn’t only belong to financial experts.

It’s possible for you and I. What if you were able to retire earlier than most people and weren’t a financial planner? What if you were able to focus on what you enjoy doing the most while your money was working hard for you?

I know this sounds impossible now, but the truth is you’re capable of taking charge of your retirement. I’m not a financial expert but I’ve learned how to invest my money by reading books and learning from others.

Investing your money is scary. So start small and invest a small amount of your money with a robo-advisor. Feel your money drop and rise for a month or two. Then, invest more and keep this up until you’re aggressively saving for retirement.

One day, you’ll wake up with a net worth you’re proud of – confident about your retirement. You now know a few strategies you can use to invest in your retirement. Will you take action to retire happy?

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Featured photo credit: Matthew Bennett via unsplash.com

Reference

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