Strategies to Save

The Ultimate Guide for Handling Your Emergency Fund

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Woman trying to protect her saving

If our lives always went according to plan, we would never be hit with expensive car repairs, sudden job layoffs, family emergencies, or unexpected health problems. But these curveballs are simply part of life, and if you’ve ever been caught off guard for one of them, you know how important an emergency fund can be.

Most of us can agree having extra money set aside to deal with life’s rough patches is a good thing, but not everyone agrees on the specifics. It’s hard to see a downside to saving as much as possible, but here are some key tactics to keep in mind.

My Emergency Fund Story

I quickly learned the importance of an emergency fund after burning out in my previous career. Five years of promoting concerts throughout North America had taken its toll, and I knew I needed a break to recharge. But working in the music business also led to excessive spending on designer clothing, fancy dinners, and too much partying—leaving little savings to show for my hard work. So I drastically cut back, saving 40-50% of everything I earned, until I had finally socked away six-months of my take-home pay. My six-month emergency fund gave me the confidence to quit my job and recharge for a few months before eventually transitioning into tech.

How Much Emergency Fund Do You Need?

Experts recommend saving three to six months of your take-home pay in liquid assets for your emergency fund. But if you’re properly insured, a smaller amount may be sufficient. It’s also important to consider your existing level of liability. Ultimately, your individual circumstances will determine how much you need.

Ask yourself these important questions during the decision making process:

  • Does your employer or union provide a loss of income protection plan like short or long-term disability insurance?
  • What are the withdrawal terms on your permanent life insurance policy?
  • How robust is your medical insurance plan?
  • What is your existing level of fixed expenses and debt? You should certainly still have an emergency fund of at least $1,000 if you’re dealing with debt.
  • Does your family have additional sources of income?
  • Do you have access to a home equity line of credit?

Although saving too much is never a bad thing, it’s definitely possible to hold onto too much cash. Be aware that inflation eats away at the value of your cash over time. Also, there’s an opportunity cost when holding too much cash in low-return investments as opposed to investing some of those funds.

Tactics To Quickly Build an Emergency Fund

One of the fastest ways to build an emergency fund is by automating your savings. If a certain amount is deducted from every paycheck, you will never have the opportunity to spend that money earmarked for savings on payday cocktails. There are a couple of ways to set this up:

  1. Speak with your company’s HR department about automatically deducting a certain amount of money from every paycheck and depositing it into your savings account.
  2. Ask your bank to automatically transfer a fixed amount from your checking account to your savings account every month.

Even $25 or $50 a month accumulates more quickly than you might think. Remember, you won’t be able to spend what’s not available. Money market mutual funds, asset management accounts, and series EE savings bonds all work well for automated savings plans.     

Allocation of Your Emergency Fund Assets

The Importance of Liquidity

Most financial advisors emphasize the importance of maintaining adequate liquidity with your emergency fund. Liquidity means having easy access to cash, without needing to dip into your long-term investments, in order to pay your bills on time.

Although I saved the recommended six months of take-home pay, I didn’t hold an adequate amount in cash. After two months without a full-time job, I was forced to sell some stocks to cover my expenses—a move that can cause a loss of principal or tax liability.

A misallocated emergency fund certainly isn’t the worst financial problem you can have. But given the choice, you’d probably prefer not to be forced to sell off your assets when they’ve declined in value.

Where To Allocate Your Assets

There’s a lot to consider when you begin thinking about where to stash your emergency fund assets. For starters, you’ll want to consider your own risk tolerance. Next, you’ll need to evaluate each option’s rate of return. This isn’t always easy to compare because compounding interest rates are quoted at different periods (annually, quarterly, or even daily). You’ll also want to think about the tax implications of these allocations. A financial planner or accountant can help with specific tax questions you may have.

Here’s a breakdown of your options:

Checking account: They are convenient, easy to use, and FDIC insured. They generally require a low minimum balance, but some accounts can incur costly fees. The primary downside is no or low interest rates. If you’re using a checking account that keeps dinging you with fees, then it’s time to switch.

Savings Account: They are FDIC insured up to $250,000 and have higher interest rates than a checking account. In some cases the interest rates can be above 1.00% APY. However, the return is still considered low compared to the alternatives. Savings accounts aren’t as liquid as a checking account as it can take a day or more to access the funds depending on your bank.

Money Market Deposit Account: These accounts are insured, have limited checking privileges, and offer relatively attractive (variable) interest rates. However, they still offer lower returns than CDs and money market mutual funds. They also require a high minimum balance.

Certificate of Deposit (CD): CDs are insured, but interest rates are fixed, so you won’t benefit if rates go up. There’s a minimum required deposit and there are penalties for early withdrawal.

Money Market Mutual Fund: These funds work well for an automated payroll deduction plan and offer some checking privileges. There’s limited risk due to the short maturity of the investments, but they are not insured. The minimum initial balance is generally between $500 and $1,000.

Asset Management Account: This account also works well with an automated payroll deduction plan and offers a high return. However, these accounts aren’t insured and require a high minimum balance of $5,000. Additionally, these accounts have monthly fees that range from $25 to $200.

U.S. Treasury Bills: These offer attractive interest rates, are exempt from state and local taxes, and guaranteed by the Federal government. However, they are far less convenient to liquidate than the other options.

U.S. Series EE Bonds: Depending on when they are purchased, the interest rate can be fixed or variable. They can purchased and redeemed at any bank and work well with automated payroll deduction plans. They are exempt from local and state taxes. Interest only accrues twice per year, and there’s a penalty if you redeem before five years.

Regardless of the amount and the allocation you choose, an emergency fund is critical for your long-term financial health. In a perfect world, you’d never have to use it, but you’ll sleep much better at night knowing you’re covered if a disaster strikes.

Kate Dore
Kate Dore |

Kate Dore is a writer at MagnifyMoney. You can email Kate at kate@magnifymoney.com

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Strategies to Save

Ultimate Guide to Teacher Student Loan Forgiveness

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

With reporting by Hannah Rounds and Brittney Laryea

Becoming a schoolteacher is heralded as a rewarding profession but not one that often comes with a large paycheck. Starting salaries for public school teachers range from $27,000 to $48,000, according to the National Education Association. And yet, teachers who graduate with a Master in Education carry an average of $50,000 in student loan debt.

With salaries like these, it’s no wonder teachers can struggle to afford their student loan payments. Thankfully, classroom teachers qualify for many debt forgiveness programs. These programs can help give teachers an extra boost to help them pay down debt while working.

These are the most important student loan forgiveness programs for teachers, which we’ll review in detail in this guide.

To skip ahead to the program you’re interested in, just click the links below.

Public Service Loan Forgiveness

Public Service Loan Forgiveness is a 2007 program that originally promised to forgive federal student loans for any employees of nonprofit or public sector companies. That, of course, includes teachers.  Under the program, borrowers who made 120 on-time payments would ultimately qualify for loan forgiveness.

However, the program’s future is now uncertain. A proposed education budget from the White House appears to eliminate the program, and it is not yet clear whether or not enrolled workers will have their loans forgiven as promised. Any budget will have to receive Congressional approval, which means we may not have a certain answer for months to come.

How do l know if I’m eligible?

Teachers at nonprofit schools are eligible for Public Service Loan Forgiveness. This includes public and private nonprofit schools. To qualify, teachers must make 120 on-time payments while working full time in a public service role.

The 120 payments do not have to be consecutive. However, you must pay the full amount listed on your bill. Additionally, your loans must be in good standing when you make the payment.

IMPORTANT: You can only qualify for loan forgiveness if you are enrolled in a qualified income-driven repayment option.  Learn more about income-driven repayment plans here.

Also, payments only count toward forgiveness if your loan is in active status. That means any payments made while loans are in the six-month grace period, deferment, forbearance, or default do not count toward forgiveness.

How can I be sure my employer is covered by PSLF?

There has been a lot of confusion about which employers are considered nonprofit or public service organizations. To be sure your employer is eligible, you should submit an employment certification form to FedLoan Servicing.

Although the future of the loan forgiveness program remains uncertain, borrowers may still want to prepare for a positive outcome and enroll in hopes that the program will continue.

How much of my loan will be forgiven?

After 120 payments, the government will cancel 100% of the remaining balance and interest on your Direct Federal Loans.

Direct Federal Loans include: Direct Loans, Direct Unsubsidized Loans, Direct PLUS Loans, and Direct Consolidation Loans.

Will I have to pay taxes?

Public Service Loan Forgiveness (PSLF) is completely tax-free. You will not see an increased tax bill the year your loans are forgiven.

How to claim Public Student Loan Forgiveness

As the program launched in 2007 and requires 10 years of on-time payments, the first group of graduates who could be eligible for PSLF will begin submitting their applications in 2017.

But don’t expect it to happen automatically. Even if you qualify for loan forgiveness, the government will not automatically discharge your loans. You need to submit the PSLF application to receive loan forgiveness.

The applications for loan forgiveness are not yet available. The U.S. Department of Education will make them available before October 2017.

What if I have a Parent Plus, Perkins or FFEL loan?

As it stands, some types of federal student loans — such as Parent PLUS, Perkins and Federal Family Education Loans — are not included under the PSLF program. One way to get around this is by consolidating those loans through the federal direct consolidation program. If you take this route, the entire consolidation loan will be forgiven.

PSLF works best in conjunction with an income-based repayment plan. These plans lower your monthly payments.

Since you will qualify for loan forgiveness, this means more money in your pocket. Just remember, you must keep your loans in good standing — making 120 on-time consecutive payments — to qualify for forgiveness.

Federal Teacher Loan Forgiveness

The Federal Teacher Loan Forgiveness program encourages teachers to work in the neediest areas of the country. Teachers who qualify can have up to $17,500 in federal loans forgiven after five years.

How do I know if I’m eligible for Federal Teacher Loan Forgiveness?

Teachers must complete five consecutive years of teaching at a low-income (Title I) school. If your school transitions off the list after your first year of teaching, your work in that school still counts toward forgiveness.

Direct Subsidized and Unsubsidized Loans and Subsidized and Unsubsidized Stafford Loans can be forgiven. Loans must have originated after October 1, 1998. This is important for anyone who hasn’t paid off loans and wants to consider teaching as a second career.

Your loans may not be in default at the end of your five years of teaching. The only exception includes loans that are set up in a repayment arrangement.

You qualify for teacher loan forgiveness as long as you are on a qualified repayment option. These include the standard 10 year repayment plans or the payments required by an income-based repayment plan. If your loan goes into a default, a repayment arrangement works with this program.

How much of my loan will be forgiven?

To receive the full $17,500 in forgiveness, you must meet one of two criteria: either work as a highly qualified math or science teacher in a secondary school, or work as a qualified special education teacher for children with disabilities.

Other highly qualified teachers can have up to $5,000 of loans forgiven if they work in Title I schools.

You’ll notice that all teachers must be “highly qualified.” To meet the highly qualified standard, you must be licensed in the state you work, hold a bachelor’s degree, and demonstrate competence in the subject(s) you teach. Do you need to check whether you’re highly qualified? The U.S. Department of Education explains qualification in detail.

Will I have to pay taxes?

The Federal Teacher Loan Forgiveness program forgives your loans and does not result in a taxable event.

How to apply

Qualified teachers must submit this application with administrative certification. Be sure you work with your school’s administration in advance.

Tips and tricks

Consider teaching at a Title I school directly after graduation. The loan forgiveness may help you achieve debt freedom within five years. Consider an income-based repayment program to lower your payments while you’re teaching.

Teacher Cancellation for Federal Perkins Loans

If you’re a teacher who took out a Federal Perkins Loan from your school, you may qualify for loan cancellation. Teachers can cancel up to 100% of their Perkins Loans after five years.

How do loans become eligible?

The teacher cancellation program for Perkins Loans is one the most lenient programs for loan forgiveness.

You will qualify to have loans forgiven if you meet any one of these three requirements:

  • You work full time in a low-income (Title I) school.
  • You work full time as a special education teacher.
  • You work full time in a designated shortage area (such as math, science, foreign language, bilingual education, or any shortage area declared by your state).

If you work part time at multiple qualifying schools, you may qualify for loan cancellation.

Your loans may be in a grace period, deferment, or any qualified repayment plan at the time of discharge. They may not be in default.

Also, you must be enrolled in a qualified repayment option. Your payment plan could be the standard 10 year repayment plans or an income-based repayment plan. If you qualify fordeferment, your loans may still be eligible for cancellation.

How much of my loan will be forgiven?

Over the course of five years, 100% of your Federal Perkins Loan will be forgiven. The discharge occurs at the end of each academic year. In years 1 and 2, the government discharges 15% of the principal balance of the loan. It cancels 20% of the loan in years 3 and 4 of service. The final year, the remaining 30% of your loan will be canceled.

In most cases, the five years of service do not have to be consecutive. However, this isn’t always the case. The university that issued your Perkins Loan administers the loan cancellation program. That means you need to check with your alma mater for complete details.

Will I have to pay taxes?

This program forgives your loans and does not result in a taxable event.

How to apply

You must request the appropriate forms from the university that holds the loans. If you don’t know the office that administers Perkins Loans, contact your university’s financial aid office.

Tips and tricks

If your Federal Perkins Loan qualifies for deferment, take advantage of this option. Under deferment, you don’t have to make any payments on the loan. At the same time, the government pays any accruing interest. Teachers who qualify for deferment can have 100% of their Perkins Loan forgiven without ever paying a dime.

TEACH Grant

The Teacher Education Assistance for College and Higher Education (TEACH) Grant isn’t like other loan cancellation programs. Under the terms of the program, you accept the money during your college years. Eligible students can receive a grant of up to $4,000 per year of education. After you graduate, you agree to work as a teacher for four years in a high-need field in schools that serve low-income families.

As long as you keep your end of the bargain, you don’t have to pay the money back. Otherwise, the grant transforms into a loan. If you’re planning to become a teacher, this can be a great opportunity. But you need to understand the details before you accept the grant.

How do I qualify for a TEACH Grant?

To qualify for a TEACH Grant, you must enroll in a teacher education program, complete the Free Application for Federal Student Aid, maintain a certain GPA (usually 3.25), and agree to a work requirement.

When you accept a TEACH Grant you agree to work as a teacher in a high-need field serving low-income families. You must complete four years of full-time teaching within eight years of graduation.

In this instance, you take the money first and agree to do the work later. That means that you’re taking on a risk.

You must complete a Free Application for Federal Student Aid form, and you must complete a training and counseling module from StudentAid.gov. Pay attention to the training; it will help you understand the risks of the TEACH Grant.

What happens if I change my mind?

If you don’t keep up your end of the bargain and meet all of the work requirements, the funds get converted into a Direct Unsubsidized Loan. What’s worse? The interest begins accruing from the point you received the grant. That means you’ll have the principal and interest to pay.

Don’t take a TEACH Grant unless you plan to meet the work requirements.

Will I have to pay taxes?

TEACH Grants are nontaxable education grants. However, you cannot claim a tax credit for education expenses paid by the grant.

Tips and tricks

The TEACH Grant offers a great way to graduate debt free, but you must commit to follow through. Don’t take the grant money unless you know that you can work as a teacher for at least four years.

Teacher Loan Forgiveness Programs by State

Several states offer generous loan forgiveness opportunities. You can use these programs in conjunction with the federal programs above. Qualified applicants might achieve debt freedom in a few years with these programs. These are some of the highlights of state loan forgiveness programs.

If your state isn’t listed, check out the database at the American Federation of Teachers. They keep track of most major scholarship and loan forgiveness opportunities for teachers.

Arkansas State Teachers Education Program

The Arkansas State Teachers Education Program (STEP) helps teachers with federal student loans pay back their loans. Teachers must work in geographical or subject areas with critical shortages.

Arkansas teachers with federal student loans can receive loan repayment assistance if they serve geographical areas with teacher shortages. They can also receive repayment assistance if they have licensure or endorsements in designated subject areas.

Eligible teachers can receive up to $3,000 per year that they teach in critical shortage areas. There is no lifetime maximum of loan forgiveness. Licensed minority teachers can receive an additional $1,000 for every year that they qualify for STEP.

Arkansas Teacher Opportunity Program (TOP)

The Teacher Opportunity Program, or TOP, awards tuition reimbursement grants up to $3000 of out-of-pocket expenses to licensed Arkansas classroom teachers and administrators with the Arkansas Department of Education.

Arkansas classroom teachers and administrators who declare an intention to continue employment as a classroom teacher or administrator in Arkansas after completing their program are eligible for TOP. Applicants must also have at least a 2.5 cumulative GPA in the courses funded by the TOP grant when they apply.

Applicants who meet all requirements can receive reimbursement for out-of-pocket expenses up to $3000 for courses related to employment. The grant reimburses educators up to 6 college credit hours each academic year.

Arkansas administrators and educators can find more information about TOP on the Arkansas Department of Higher Education website. Applicants must complete and submit an application to The Arkansas Department of Higher Education by June 1 each year.

Delaware Critical Need Scholarships

The Critical Need Scholarship program reimburses Delaware teachers for all or part of tuition and registration fees paid for courses that contribute toward the completion of a Standard Certification.

Full-time employees of a Delaware school district or charter school who teach on an Emergency Certificate in a critical need area as defined by the Delaware Department of Education. Applicants must also have a minimum 2.0 GPA.

The scholarship forgives all or part of tuition and registration fees paid up to $1,443 for undergraduate coursework or up to the cost of three credits per term for graduate coursework, not to exceed the cost of three credits at the University of Delaware.Courses must contribute toward the completion of a Standard Certification.

Teachers can find more information and application instructions here. You must apply through the school district or charter school where you are employed. The application cycles twice each year; one deadline is in January and the other is in June.

Illinois Teacher Loan Repayment Program

The Illinois Teacher Loan Repayment Program offers up to $5,000 to Illinois teachers who teach in low-income schools in Illinois. This award is meant to encourage the best teachers to serve students in high-need areas.

The Illinois Teacher Loan Repayment Program is a unique loan forgiveness matching program. Teachers must meet every qualification to receive Federal Teacher Loan Forgiveness. In addition, teachers must have served all five years in a low-income Illinois school.

Teachers who meet all requirements can receive federal loan forgiveness up to $5,000. You must apply for Illinois loan repayment funds within six months of receiving federal loan forgiveness.

Iowa Teacher Shortage Forgivable Loan Program

Iowa offers student loan repayment assistance to state-certified teachers as an incentive for educators to teach in subjects with a shortage of instructors through the state’s Teacher Shortage Forgivable Loan Program.

Current Iowa teachers who began their first teaching position in Iowa after July 1, 2007 and are completing studies in a designated shortage subject area are eligible for the Teacher Shortage Forgivable Loan Program.

Teachers must have a balance on either a Direct Stafford Loan or Direct Consolidation Loan and agree to teach in the shortage subject area upon graduation. For 2016 graduates, the maximum award is $6,858.

Recipients are awarded up to 20% of their remaining loan balance annually, up to the average resident tuition rate for students attending Iowa’s Regent Universities the year following graduation.

Teachers can find more information on the Iowa College Student Aid Commission website. The 2016-17 application window is between January 1 and March 31, 2017, for the academic year. Recipients must reapply each year.

Maryland Janet L. Hoffman Loan Assistance Repayment Program

Maryland offers loan repayment assistance to excellent teachers who teach STEM subjects or in low-income schools.

Only teachers who earned a degree from a college in Maryland or a resident teacher certificate from the Maryland State Department of Education qualify for this award. Additionally, qualified Maryland teachers must serve in low-income (Title I) schools or other schools designated for improvement. Alternatively, licensed teachers who work in designated subject areas such as STEM, foreign languages, or special education can qualify.

To qualify, you must earn less than $60,000 per year or $130,000 if married filing jointly.

Qualified teachers can have up to $30,000 repaid over the course of three years. The repayment assistance you receive depends on your overall debt load.

Total Debt Overall Award Limit Yearly Payment
$75,001 – Over $30,000 $10,000
$40,001 – $75,000 $18,000 $6,000
$15,001 – $40,000 $9,000 $3,000
$15,000 – Below $4,500 $1,500

The Janet L. Hoffman Loan Assistance Repayment Program offers some of the most generous loan repayment terms. However, the program has stringent eligibility requirements. To find out more about your eligibility, visit the Maryland Higher Education Commission website.

Mississippi Graduate Teacher Forgivable Loan Program (GTS)

The Graduate Teacher and the Counseling and School Administration Forgivable Loan Program (GTS/CSA) was established to encourage classroom teachers at Mississippi’s public schools to pursue advanced education degrees.

Disclaimer: Due to budget constraints, only renewal applicants will be offered funds from the GTS program for the 2017-18 school year. No awards will be made to new applicants. It’s not clear whether the GTS program will resume offering funds to new applicants in the future.

Current full-time Mississippi public school teachers earning their first master’s degree and Class ‘AA’ educator’s license in an approved full-time program of study at a Mississippi college or university are eligible for the GTS program.

Selected applicants are awarded $125 per credit hour for up to 12 credit hours of eligible coursework.

Teachers can find more information about GTS program on the Rise Up Mississippi website. Complete and submit the online application with all supporting documentation by the year’s stated deadline. The application must be completed each year to remain eligible.

Mississippi Teacher Loan Repayment Program (MTLR)

The Mississippi Teacher Loan Repayment Program, or MTLR program, helps teachers pay back undergraduate student loans for up to four years or $12,000.

Disclaimer: Due to budget constraints, only renewal applicants will be offered funds from the MTLR program for the 2017-18 school year. No awards will be made to new applicants. It’s not clear whether the MTLR program will resume offering funds to new applicants in the future.

Mississippi teachers who currently hold an Alternate Route Teaching License and teach in a Mississippi teacher critical shortage area or in any Mississippi public or charter school if teaching in a critical subject shortage area are eligible for the MTLR program. Perkins and Graduate-level loans are not eligible for repayment.

Recipients can receive a maximum $3000 annually toward their undergraduate loans for up to four years or $12,000.

Teachers can find more information on the Rise Up Mississippi website. Complete and submit the online application by the year’s stated deadline. The application must be completed each year to remain eligible.

Montana Quality Educator Loan Assistance Program

The Montana Quality Educator Loan Assistance Program encourages Montana teachers to serve in high-needs communities or in subject areas with critical shortages. The program provides direct loan repayment for teachers who meet the requirements.

Licensed Montana teachers who work in “impacted schools” in an academic area that has critical educator shortages. Impacted schools are more rural, have more economically disadvantaged students, or have trouble closing achievement gaps.

Montana will repay up to $3,000 a year for up to four years.

New York City Teach NYC

Teachers hired by the New York City Department of Education who work in specified shortage positions can receive up to $24,000 in loan forgiveness over the course of six consecutive years.

Teachers must work in a New York City school in one of the following designated shortage areas:

  • Bilingual special education
  • Bilingual school counselor
  • Bilingual school psychology
  • Bilingual school social worker
  • Blind and visually impaired (monolingual and bilingual)
  • Deaf and hard of hearing
  • Speech and language disabilities (monolingual and bilingual)

The NYC Department of Education will forgive one-sixth of your total debt load, each year for up to six consecutive years. The maximum award in one year is $4,000. The maximum lifetime award is $24,000.

North Dakota Teacher Shortage Loan Forgiveness Program

The North Dakota Teacher Shortage Loan Forgiveness Program encourages North Dakota teachers to teach in grades or content levels that have teacher shortages.

The North Dakota Department of Public Instruction identifies grades and content areas with teacher shortages. Teachers who work full time as instructors in those grades and content areas in North Dakota can receive loan forgiveness.

Teachers can receive up to $1,000 per year that they teach in a shortage area. The maximum lifetime award is $3,000.

This program is administered by the North Dakota University System. To get more information, teachers should visit the North Dakota University System website, call 701-328-2906, or email NDFinAid@ndus.edu.

Oklahoma Teacher Shortage Employment Incentive Program

Oklahoma’s Teacher Shortage Employment Incentive Program, or TSEIP, is a legislative program carried out by the Oklahoma State Regents for Higher Education to help attract and keep mathematics and science teachers in the state.

Oklahoma state-certified classroom teachers who are not yet certified to teach math or science are eligible for TSEIP. Teachers must also agree to teach in an Oklahoma public secondary school for at least five years.

TSEIP reimburses eligible student loan expenses or a cash equivalent. The amount reimbursed varies from year to year.

Teachers can find more information on about the TSEIP on the Oklahoma State Regents for Higher Education website. Fill out and submit the Participation Agreement Form to your institution’s TSEIP coordinator no later than the date of your graduation from a four-year college or university in Oklahoma.

South Carolina: Teachers Loan Program

The South Carolina Teachers Loan awards forgivable student loans to students studying to become public school teachers. The program was created as an incentive for state residents to pursue teaching careers.

South Carolina school teachers and residents enrolled at least half-time at an accredited institution. Students must already be enrolled in a teacher education program or express an intent to enroll in a teacher education program. If already certified, you must seek an initial certification in a different critical subject area.

Freshmen and sophomore recipients can borrow $2,500 for each year, all other recipients can borrow $5,000 each year, up to $20,000. Loans are forgiven only if teachers work in an area of critical need.

Teachers can find more information on about the Teachers Loan Program on the South Carolina Student Loan website.Download and complete the application and submit it to South Carolina Student Loan.

South Carolina Career Changers Loan

The South Carolina Career Changers Loan awards forgivable student loans state residents who wish to change careers to become public school teachers. The program was created as an incentive for state residents to pursue teaching careers.

South Carolina residents who meet all requirements for the Teachers Loan, and have had a baccalaureate degree for at least three years. In addition, you must have been employed full-time for at least three years.

Recipients can borrow up to $15,000 per year up to $60,000.

South Carolina residents can find more information on about the Teachers Loan Program on the South Carolina Student Loan website.Download and submit a completed application to South Carolina Student Loan.

South Carolina PACE Loan

The South Carolina Program of Alternative Certification for Educators (PACE) loan reimburses individuals who have completed a PACE program. Those who are interested in teaching who have not completed a teacher education program may qualify to participate in the PACE program.

Teachers must be enrolled in the South Carolina Program of Alternative Certification for Educators (PACE) program and have received an Educator’s Certificate for the current year. You must be teaching full-time in a South Carolina public school.

Participants can borrow up to $750 per year, capped at $5,000.

Teachers can find more information on about the PACE Loan program on the South Carolina Student Loan website.Download and submit a completed application to South Carolina Student Loan.

Tennessee Math & Science Teachers Loan Forgiveness

The Tennessee Math & Science Teacher Loan Forgiveness Program is offered through the Tennessee Student Assistance Coalition. The program awards up to $10,000 of forgivable loans to public school teachers working toward an advanced degree in math or science or earning a certification to teach math or science.

Tenured Tennessee schoolteachers working toward an advanced degree in math or science or earning a certification to teach math or science at an eligible institution. Recipients Must work in a Tennessee public school system for two years per each year of loan funding received.

Recipients are awarded $2,000 per academic year up to $10,000.

Teachers can find more information on the Tennessee Student Assistance Coalition website. Teachers must reapply for the program each academic year. The application has two cycles; one deadline is in February, the other is in September.

Teach for Texas Loan Repayment Assistance Program

The Teach for Texas Loan Repayment Assistance Program encourages Texas teachers to serve high-needs areas. Qualified teachers can receive up to $2,500 in loan repayment per year with no lifetime maximum.

Any Texas-based teacher with outstanding loans can apply for loan repayment assistance. However, funds are given out with priority to teachers who work in shortage subjects in schools with at least 75% economically disadvantaged students. Shortage subjects include ESL, math, special education, science, career education, and computer science.

If funds remain, they are given out in the following order:

  1. Teachers who work in areas with 75% or more economically disadvantaged students in nonshortage subjects.
  2. Teachers who work in shortage subjects in schools with 48.8%-75% economically disadvantaged students.
  3. Teachers who demonstrate financial need.

Eligible teachers can receive up to $2,500 in loan forgiveness each year with no lifetime maximum.

West Virginia Underwood-Smith Teacher Scholarship Loan Assistance Program

West Virginia teachers who work in critical need positions may qualify for the Underwood-Smith Teacher Scholarship Loan Assistance Program. This scholarship helps qualified teachers pay back student loans.

Teachers and school professionals who work in a designated critical position can qualify for the Underwood-Smith scholarship. Critical positions include all teachers in underserved districts and certain teachers who teach subjects with designated shortages.

Qualified teachers can receive up to $3,000 per year in federal loan forgiveness and up to $15,000 over their lifetime.

West Virginia teachers can learn more about the scholarship on the College Foundation of West Virginia website. The most recent list of critical needs can be found here.

Pros & Cons of Student Loan Forgiveness

While some or all of a student loan balance magically disappearing is a dream for many Americans, student loan forgiveness programs aren’t always a walk in the park. Here are the pros and cons.

Pro: Poof! Your debt is gone.

A huge upside of student loan forgiveness is obvious: borrowers can get rid of a significant amount of student loan debt. Beware of caps on the total amount of debt that can be forgiven with some programs. For example, the federal government’s Teacher Loan Forgiveness Program caps loan forgiveness at $17,500.

Con: Eligibility

It’s tough to first qualify and then remain eligible for student loan forgiveness. For example, teachers are eligible for the federal Teacher Loan Forgiveness program, but those who got teaching degrees before 2004, only qualify to have $5,000 worth of loans forgiven. To top that, borrowers must also remember to update their repayment plans each year or risk losing eligibility for the program.

Pro: No tax…sometimes.

The federal repayment plans don’t tax the forgiven amount as income, so you won’t need to pay taxes on the forgiven balance there. However, other programs may not grant the same pardon. If your loans are repaid through a different program, you might be required to count the money received towards your income and pay taxes on it. Look at the program carefully and prepare to set aside funds in case you do need to pay up.

Con: Limited job prospects

Loan forgiveness is give and take. You might be limited to teaching in a particular subject or geographic location for a period of time in order to get your loans forgiven. This could mean relocating your family or a long commute if you unable to live near the location. If you fall out of love with teaching, you might be stuck with the job, just to get your loans paid off.

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MagnifyMoney is a writer at MagnifyMoney. You can email MagnifyMoney at info@magnifymoney.com

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College Students and Recent Grads, Retirement, Strategies to Save

Why the ‘Save 10% for Retirement’ Rule Doesn’t Always Work

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To keep saving simple, many retirement experts and financial planners tout a general 10% rule for most savers: If you start saving at least 10% of your income in your 20s, you should have plenty saved up by the time you’re ready to retire.

Why save for retirement?

Social Security might not be around to help you make ends meet in retirement; that’s even more likely for millennials and the cohorts that follow. With the nation’s current birth and death rates, it’s estimated that Social Security funds will be exhausted by 2034.

Whether or not the future retirees of America will have Social Security to rely on, their benefit check alone likely won’t be enough to meet all of their needs in retirement.

According to the U.S. Bureau of Labor Statistics, retired households need to bring an average $42,478 to meet their annual expenses.

And yet, as of March 2017, the average monthly Social Security benefit for retirees was $1,365.35, or about $16,384 annually. That’s only slightly more than the U.S. Census Bureau’s 2016 poverty threshold for two-person households 65 and older ($16,480). Even in households where two spouses are receiving Social Security income, that’s still less than $32,000 per year.

That’s why it’s so important for workers to set additional income aside during their working years. When Social Security falls short, those extra savings will be essential.

Who does the 10% retirement rule work best for?

It’s likely that 10% became the rule of thumb simply because it’s easy to remember and makes the mental math a lot easier. But it’s important to understand who the rule is targeting: younger workers.

Since younger workers have more time to let their money grow, they can afford to save a bit less in their early days. But the advice changes as workers’ savings windows narrow with age. A 40-something worker, for example, who never saved for retirement may be encouraged to save twice as much for retirement since they have a shorter timetable.

“Ten percent may be enough, it may not be enough, and it may even be too much,” depending on your age and financial picture, says Amy Jo Lauber, a certified financial planner in Buffalo, N.Y. Someone paying off student loans or high-interest credit cards simply may not be able to put away 10% of their income.

It gets increasingly complicated when you consider your personal income and ability to save as well as your retirement goals.

“Typically, younger clients do not have complex situations and can get by with simple strategies. Once there are competing priorities, such as saving for a home, kids, and kids’ college, then things get complicated and more sophisticated strategies are required,” says Howard Pressman, a certified financial planner and partner at Egan, Berger & Weiner.

As Pressman suggests, you might need to tweak the rule if you’re starting to stash away retirement funds at an earlier or later age or want to put more money away now for a more lavish retirement.

Timing is everything

This chart from JP Morgan’s 2017 Guide to Retirement demonstrates the power of saving early for retirement.

At a modest 6% annual growth rate, Consistent Chloe, a 25-year-old who puts away $5,000 a year until she reaches age 65 should have a retirement account balance of more than $820,000, according to the bank. And when all’s said and done, only $200,000 would have come out of her own pocket — the rest would have resulted from the power of compounding interest.

In comparison, Nervous Noah, a more timid 25-year-old saver, could put away the same $5,000 a year in a savings account earning far less annual interest on his cash. After the same 40-year period, he would only have a balance of $308,050.

Investing earlier can bring even greater success. If a person starts putting away $5,000 a year at 20, growing at 6%, their balance at 65 would be about $1,132,549, which we calculated using the U.S. Securities and Exchange Commission’s compound interest calculator. That’s more than $300,000 added to Consistent Chloe’s retirement balance for beginning just two years earlier.

The final balance at 65 drops below $1 million for anyone starting after 25. As you can see above, those who begin saving will have less and less to live on in retirement.

7 retirement savings tips

  1. Start early

The emphasis of this rule is starting early. The earlier you save, the more you can take advantage of compound interest.

“Compounding is earning interest on interest earned in prior periods and is the most powerful force in all of finance,” says Pressman. To make the most of this rule, start saving 10% of your income for retirement by the time you turn 25.
Start by maxing out your 401(k) or IRA contribution limits for the year. If you still have additional funds, it might be time to meet with a financial planner to find out how to best invest your surplus.

  1. Know your options

The best place to stash retirement savings is either an IRA or a 401(k). Your money simply won’t grow enough to beat inflation if you leave it in a low-interest-bearing account like a checking or savings account.

  1. Make debt and emergency savings a priority

“Before anyone starts focusing on retirement saving, the first thing they should do is to establish an emergency cash reserve. This is to protect them from a job loss, a health emergency, or even an expensive car repair,” says Pressman. He recommends saving three to six month’s worth of expenses in a savings account.

If placing 10% of your income in a retirement account is too much of an ask because you have more pressing financial obligations like higher-interest debts, or don’t earn enough to cover your expenses, you should address those before increasing your retirement contribution.

Generally speaking, if the interest rate on any debts you owe is higher than what you’d earn on your retirement savings, you’ll make more progress toward your financial goals by addressing the higher-interest debt first.

  1. Plan differently if you have irregular income

Lauber says those who are freelancing and cobbling together a living may need to put several financial policies in place to help them navigate with irregular income.

“The 10% rule works for them but only if other measures are in place for the immediate day-to-day needs,” says Lauber. You can still create a budget with irregular income, but you might need to approach retirement saving more aggressively when income is higher, and strategize your saving to compensate for months when income is nonexistent or low. Find more tips on how to manage irregular income here.

  1. Make the most of your match

Don’t leave free money on the table. If your employer offers to match your contribution, Kristi Sullivan, a certified financial planner with Sullivan Financial Planning in Denver, Colo., advises individuals to save as much as your employer matches immediately or 6% if there is not a match. That way, you won’t miss out on free additions to your retirement nest egg.

  1. Automate your contribution

Out of sight, out of mind. Automate your retirement contribution to ensure you pay yourself first.

“Typically, once it’s done through payroll deduction, the person seldom misses it,” says Lauber.

  1. Check in regularly

Don’t just “set it and forget it.” Mark R. Morley, certified financial planner and president of Warburton Capital Management, stresses “clients must be ‘invested’ in their own plan.”

He says to check periodically on your retirement account and make adjustments where necessary. If you have a financial adviser, you may want to schedule regular progress meetings.

“When a client is engaged in their own plan and can see real results, we can work on the two variables that affect the retirement accounts: time and money,” says Morley.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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College Students and Recent Grads, Strategies to Save

9 Things Every 20-Something Should Know About Money

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

If you’re a “younger” millennial and find yourself struggling with your finances in your 20s, pay attention.

There’s no better time to learn about money than when you’re young and broke. The 10 years between 20 and 30 go by fast, and will be full of many important life changes that can shape your overall financial future. Whether it’s financial planning, saving, or investing, the sooner you start, the better off you’ll be.

If you can educate yourself on how to manage the little money you have now, you’ll be better prepared to manage your finances effectively when you earn more and life inevitably gets more complicated.

Lucky for you, today’s technology provides you with a wealth of (free) financial information at your fingertips, including this handy list of expert-approved money lessons to learn on your journey to dirty 30.

9 Things You Should Learn about Money in your 20s

#1: The magic of spending less than you earn

The first financial lesson you should learn is simple enough: spend less than you earn. Most people mess this one up.

At least, Pew Research shows 68% of Americans say they use credit cards and loans to make purchases that they otherwise wouldn’t be able to afford with their income and savings. This leads to more stress in your life, a dependency on debt, and an endless cycle of working to pay off or evade lenders.

Learn to follow a budget well and you’ll easily learn to live within your means. You may even take it a step further in your 20s — save more by living below your means, not just within your paycheck.

“Gain peace of mind that you’re being responsible by setting up guidelines for your spending and savings early in your 20s,” says Dan Andrews, certified financial planner and founder of Well-Rounded Success. The website provides financial guidance geared toward a millennial audience.

If you get those guidelines set early in your life, you’ll likely have an easier time addressing more complicated money topics like homeownership and having kids. If not, a large unexpected bill or the birth of a child could destroy your finances.

#2: Eventually something will go wrong

In the savings hierarchy, your emergency fund should be your first priority.You are bound to run into an emergency eventually.

“I know when you’re a 20-something, you feel invincible, but the fact is, emergencies are still going to arise, it’s not a matter of if, but when,” says Gen Y financial expert and author of The Broke and Beautiful Life Stefanie O’Connell.

The rule of thumb says to set aside 6 to 12 months’ worth of fixed expenses in case of an emergency. You can stash this money in a checking account, savings account, or any of these other options.

If you don’t plan for a financial emergency, you’ll find yourself in a tight spot when an emergency undoubtedly happens. If, for example, you lose your income, a liquid savings buffer might save you from turning to your parents for money or taking on high-interest debt to survive. That’s not an improbable crisis to imagine, as almost half of American households experience volatile income.

“By setting aside money, you can live off this savings while you look for new work, or better yet, have the flexibility to pursue the work you want,” says Andrews.

After the dust settles, you can high-five yourself for handling your crisis on your own.

#3: “YOLO” is a pretty terrible financial strategy

One of the hardest parts of your 20s is learning to think past “today” when making money decisions — especially when everyone seems to want to live in the moment.

Really ask yourself what goals you have for the future: Starting your own business? A family? Now is the time to stop thinking and start planning for how you’ll afford those life milestones when the time arrives.

Make it a habit to plan and save early for these stages before you reach them. When you’re planning, think about what’s most important to you and nearest in your life’s timeline. Don’t forget to consider the time it would take to save for larger expenses.

O’Connell gives the following example: If you decide to start saving for a $50,000 home down payment just two years before you plan to buy a home, you’ll have to save $25,000 a year. That’s tough. But if you think about that milestone money goal from 10 years out, you only have to save $5,000 a year, which is much more manageable.

Not every account has to be for a huge savings goal like a mortgage payment. You can practice the habit of planning ahead with any large purchase you plan to make.

“Create fun savings accounts, like a travel fund or to save up for that Dr. Seuss painting that you really want. These savings accounts motivate you to stash away more money for the financial milestones in your future,” says Andrews.

#4: The key to getting a killer credit score

Don’t get bogged down trying to understand everything about your credit score and why it’s so important right now. Just remember a few key facts so that you don’t mess up your score early and spend the next decade trying to undo the damage.

  • Use your credit card, but pay it off in full each month.
  • Don’t max it out. In fact, never use more than 30% of your total available limit.
  • The best strategy: Put one small bill or recurring purchase (like coffee) on your credit card, and pay it off each month. Use cash for everything else.

If you focus on those things, you should easily avoid derogatory marks on your credit report and quickly build a healthy credit score. Learn more tips to build your credit score here.

#5: One day you will get old and want to retire

Remember how we said it’s hard to think far into the future in your 20s? Well, this is going to be challenging. But it’s crucial to start saving for retirement as early as possible. Your biggest advantage to saving for retirement is your age. The younger you are, the more time you have to take advantage of compound interest on your retirement savings and other investment accounts.

So figure out what retirement savings options your employer offers (typically a 401(k)) and open an account. If your employer offers a match, then that is amazing and don’t miss out — it’s free money.

Contact your employer’s human resources department for help working through your options. That is what they are there for. A great, hands-off option for young savers is a Target Date Fund. Then set up an automatic payroll deposit at least high enough to capture any match your job offers.

Don’t worry about the swings of the stock market. Don’t worry about picking the perfect portfolio. Just put money in your retirement fund as early as possible and get to the complicated stuff later. The point is that you start saving for retirement — not that you become the next Warren Buffett right away.

“Too many young people don’t take advantage of all the benefits they can get at their workplaces. Simply ask your HR department if there’s a match on 401(k) contributions,” says Andrews.

Once you get a good grasp on retirement savings, you can upgrade to more sophisticated investing strategies.

#6: How to be your own “tax guy”

Do your own taxes at least once. The experience will give you a better idea of how the tax system works and can save you an average $273 you’d otherwise spend on tax preparation fees. Many free and low-cost options exist to e-file your taxes, including free filing options found on the IRS website.

“When you do your own taxes it also helps to demystify the process. If you decide to pay for help in the future, you’ll be able to vet your future accountant and hold your own in conversations,” says O’Connell.

She advises young people to take the opportunity to learn about how the tax system works and any tax strategies you can use to save money in the future, like making Roth IRA contributions, tuition payments, or charitable donations.

Another reason to learn now: Your taxes may never be simpler to understand. There may be special circumstances that require you to hire a tax professional when you’re older, like getting married, investing in the stock market, or owning your own business. If you feel like you need professional help, look for a tax preparer since their rates are typically cheaper than hiring a Certified Public Accountant.

#7: When to ignore social media


Don’t get caught up in spending your money to catch up with whatever your other friends are doing. You don’t know what anyone’s financial picture looks like behind all those Instagrammed vacations or a wedding album fit for a princess.

“Your day will come when you make your friends jealous, but that’s not the point. The point is to focus on your financial life to give you the foundation to live your great life,” says Andrews.

He advises 20-somethings to gain resilience while young, because you’ll likely compare your lifestyle to others at every age.

#8: Your debt won’t go away if you ignore it

If you do decide to ignore your debts, you could suffer consequences even worse than a dinged credit score.

Debt collectors can sue you for payment. If you ignore a debt lawsuit, the resulting judgment could result in garnished wages or lost assets.

“You’ve got to become proactive about your debt. It has to go from being something you procrastinate to something you prioritize. And a priority is something you build your life around,” says O’Connell.

O’Connell suggests you change your mindset to think of debt as an emergency that needs to be addressed immediately.

“In moments of crisis we don’t make excuses, we get ruthless because we have to. Excuses like, ‘but it’s a special occasion’ or ‘I can’t give up my vacation’ don’t even cross our minds,” says O’Connell. She adds getting ruthless might mean making some sacrifices and hustling to earn more income, but it’ll be worth it when you’re debt-free.

Struggling to make your student loan payments? You’ve still got options.

#9: How and when to negotiate your salary

Remember, the salary you earn at your first real-world job “will serve as the anchor from which you negotiate future raises, making your starting salary, arguably, the most important of your career,” says O’Connell.

That in mind, it’s worth negotiating a bit to get the best deal you can when you’re presented with your first employment offer. Hiring managers and recruiters expect candidates to negotiate; to them, it demonstrates initiative. The experience will also give you an opportunity to educate yourself about negotiation skills and get valuable, real-world practice.

Again, the internet is your friend here. You can learn salary negotiation tactics from numerous online resources, then practice with friends or mentors so you’re ready when a real offer is on the table. One word of warning: Don’t bite off more than you can chew. Remember, you can ask for much more than more money (think: commuter benefits, education credit, etc.).

If you’re asking for a raise with a current employer, consider the average pay raise for salaried employees in 2017 is 3%, according to the Economic Research Institute, a think tank that provides salary survey data to Fortune 500 companies. So asking for a salary hike from $50,000 to $60,000 is pushing it at a 20% pay raise without much experience to justify your ask.

To sum it all up…

Just do your best. Focus on learning these concepts, but don’t beat yourself up. If you stray from your path to financial freedom every now and then, it’s all right. You can’t expect to be a perfect money manager — even accountants have accountants — but if you correct yourself when you make mistakes early on, you’ll be glad you made the effort later on in life.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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College Students and Recent Grads, Strategies to Save

13 College Costs You Don’t Think About

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

When families think of financing a college education, they usually think about covering tuition costs. It’s easy to home in on tuition — after all, it’s an obvious, in-your-face expense. But tuition and fees don’t make up the largest portion of the average cost of college attendance.

In the College Board’s most recent Trends in College Pricing, researchers found non-tuition-related expenses at public four-year schools account for 61% of a total $24,610 average cost of attendance.

Here are a few hidden college costs for families to consider before the school year starts.

Housing

Room and board make up about 42% of the total cost of attendance at four-year public institutions, according to the College Board. After tuition, housing is the second-largest expense students will encounter.

For students who choose (or for whom it is required) to live in on-campus housing, room and board might be a non-negotiable expense. The cost to live in a dorm can vary from as low as $5,326 for the school year to more than $18,000 according to U.S. News Short List rankings. Generally speaking, it’s cheaper to live on campus in areas with higher rent, while off-campus housing is cheaper in areas with lower rental costs.

Other on-campus living requirements such as enrollment in the school’s meal plan, a security deposit, and dorm fees can also add up.

Don’t assume the university’s housing cost estimate is correct, as schools use different factors to calculate costs. A 2015 Trulia analysis found “schools often underestimate the cost of off-campus housing, sometimes by thousands of dollars for the school term.” For example, the University of California, Berkeley, estimates a student would spend $7,184 to live off campus, while Trulia’s data showed it would cost $12,375 for two students to share a two-bedroom apartment for nine months.

Tips to save on off-campus housing:

Compare costs to on-campus housing. Depending on where you attend school, a 9- or 12-month off-campus lease plus utilities and internet might actually be more expensive than room and board in a university dorm.

Look for roommates to help ease the burden of utilities and other bills.

Use search engines like Uloop and College Student Apartments to filter through housing options near your school and find even more savings.

Furniture and decor

Plan to budget a few hundred bucks for furniture and decor. If you’re lucky, your dorm or apartment might include a few pieces of furniture. Even then, you’ll need bedding, curtains, linens, and other staples. Plan to spend funds on furniture and decorations to make the new space feel like home.

The good news is that any college town where students are constantly moving in and leaving each year are great for the resellers market. Check out Craigslist in your area to save on furniture, or resale sites like AptDeco, Furnishare, or Furnishly. Facebook’s new marketplace feature is a good idea, too.

Pro tip: Consider starting a college registry. Target’s College Registry offers a 15% discount on any items that aren’t purchased. Also, don’t forget your student ID card. Some retailers may offer student discounts.

Parking fees

If you plan to commute or keep a vehicle on campus, set aside money for parking ahead of time. Schools typically offer a range of parking packages for students. For example, student parking permits at Boston University go for as low as $266.40 per school year for evening commuters, to $1,905.50 for those who live on campus and need to park overnight.

You may be required to pay a lump sum for parking at the beginning of each semester. Check if your school prices parking passes by location. If they do, research on-campus transit. You may be able to pay for cheaper parking farther from your classes, then hop on campus transit to class. Consider cheaper parking options like city parking lots or curbside options if there are any nearby.

Study abroad and other travel

College years are prime time for travel. Whether you’re hitting the beach with friends on spring break or considering an extended study abroad program, you could easily spend thousands of dollars on travel over the course of four years.

Study abroad programs, complete with room, board, instruction, and sometimes internships, can get pricey. For example, Northwestern University estimates a year studying abroad in Brazil to costs about $21,000 for students, while a summer abroad in the University of Georgia’s UGA en Buenos Aires program costs $4,294, plus about $3,000 in tuition and fees.

Often, students finance study abroad trips with financial aid. Just think it through before you take on more debt, especially if you’ve taken on a lot of student debt already. Many school study abroad offices offer scholarships for students. Another good source is Cappex.com, which tracks college scholarships.

Food

The average college and university charges about $4,500, or $18.75 per day, for a three-meal-a-day dining contract for a typical 8- or 9-month academic year, according to the Hechinger Report, an independent, nonprofit education news site.

If you want to use the meal plan but the standard campus meal plan is too expensive or wasteful for your budget, you could find savings in a lower-cost plan. Many post-secondary institutions offer lower-cost meal plan packages. Schools may also require first-year students or those living on campus to sign up for a meal plan, but allow upperclassmen and commuters to decide to what extent — if at all — they want to participate.

For example, at New York University, a student can pay $2,800 per semester for an all-access meal plan (28 meals per week) or as little as $1,210 per semester for a so-called “flex” plan (5 meals per week).

Books, fees, and supplies

Textbooks and class fees don’t come cheap. The average full-time student at a four-year public institution will spend $1,298 per year on books and supplies, according to the College Board.

Sometimes, fees come as a surprise. In an ongoing study, Wisconsin HOPE Lab researchers tracked the cost experiences of students at four public universities in Wisconsin. At one school, students on the waiting list for a required English course that was full were told to sign up for the online version. Without a heads up, the students were charged an unexpected $250 online course fee.

A student might also need to purchase special equipment or software essential to a course or course of study. Science and technology courses may tack on lab fees, while art students may shell out cash for studio time or class materials.

If you can get hold of a course syllabus early, you should. Don’t only look for what’s required to pass. Check carefully for any fees or payments needed to take the course before you show up. If you can’t get a copy of the syllabus and are unsure, you can usually reach the professor to ask via email.

Your family’s changing financial picture

stressed worker job work

You could be surprised by a rise in your cost of attendance if you or your family’s financial picture changes.

The effects of this scenario are demonstrated in the Wisconsin Scholars Longitudinal Study, a six-year-long investigation of how Pell Grant recipients attending public institutions in Wisconsin experienced the price of higher education conducted by the HOPE Lab.

Researchers found the financial burden on students grows over time as tuition rises and families experience financial changes. Twenty percent of students in the study experienced a median $1,215 hike in the Expected Family Contribution — how much of the cost of attendance their household was expected to pay after their first year. When your EFC grows, it means you’re likely to be awarded less financial aid.

Many students, they found, also lost eligibility for the Pell Grant and other aid dependent on Pell eligibility.

Dried-up scholarships and grants

Additionally, students usually receive the most financial aid for their first year of college, but scholarships and grants may not stick around for all four years. They could be allotted for the first year only, or a student may lose academic or financial eligibility. Many universities use “front loading” to attract freshman to the school. They recruit incoming freshman with grants and scholarships and may not continue to fund grants for continuing students. On average this increases the net price from the first to second year of college by about $1,400.

Contact your school’s financial aid office early on if you expect a change in income to affect your EFC, as you may be able to explain your situation in an appeal. If you receive a scholarship or grant, carefully scrutinize the terms to make sure you know how long the money will last and what you’ll need to do to keep the award.

A new laptop

For many courses, having a laptop or access to a personal computer is crucial to success. Be prepared to pay $700 to $1,500 for that success, depending on the specs you need to excel in your major.

Some of the pricing is dependent on the laptop’s operating system. Students can get a Google computer for a couple of hundred dollars or a PC for less than $700, while an Apple Macbook Air starts at about $1,000. Always ask about a student discount. Some retailers like Apple offer discounted education pricing models for students and educators. Others, like Best Buy, periodically send out a newsletter with college student deals. You could save hundreds just by leveraging your student status.

Try using the school’s computers to complete work outside of class if they come with the software you need already loaded. You may also be able to rent laptops, tablets, cameras, and other technology from your school or local retailers. If you need to purchase software, and it can be downloaded on multiple computers, you could share a login with a classmate to share and split the cost.

Club and organization fees

Socializing comes at a price in college. Campus organizations often charge membership dues ($10-$25 at the low end), but it can get much more expensive for students looking to enter a sorority or fraternity. UCLA estimates the average annual cost of room, board, and dues to be about $7,650 for sororities and $8,328 for fraternities. That’s before adding in all of the other membership costs like clothing and fees to attend social functions.

While in an organization, there will likely be multiple occasions when you would need to buy merchandise, gifts, or clothing for events. If you’re into sports, for example, you may want to participate in an intramural sports league. You might need to pay a league fee, then purchase equipment and a team uniform.

Overall, keep your budget top of mind when faced with these opportunities. You might think twice about handing over thousands to your new “brothers” if it means skipping meals later on in the semester.

Internships


Internships — especially unpaid ones — can get expensive. Internships present a great opportunity for students to connect with others in their selected field and learn on-the-job skills, but they don’t pay much. For a student financing their education alone, an unpaid or low-paying internship could mean a missed opportunity. You could get offered the internship of your dreams with a large company, then have to turn it down if the pay is too little to cover your living costs.

Let’s say you accept an unpaid part-time summer internship offer (in exchange for course credit) from a firm in an expensive city like Los Angeles. It may be nearly impossible to make ends meet without financial assistance from your family or loans. Yes, you could probably cover some costs with another part-time position, or save money by staying in co-living community like Purehouse, but you’ll be scraping by to eat decent food or do anything outside of work.

The most competitive and best-paying internships are quickly filled. Apply to paid internships early on if an unpaid internship is out of the question. Periodically check for paid spring and summer internships with fall semester deadlines. Look for internships close to campus or your family to offset costs. If the internship is in another city, check to see if you have family or friends you can stay with for the time.

“Fun”

Social events present great opportunities to connect outside of class with others in your major or cohort. However, being a social butterfly is a quick way to deplete any bank account.

For example, student season tickets for the 2016 Ohio State football season ran students $180 to attend all five Big Ten conference games. To attend an additional two conference games, students would need to purchase a $252 package. That’s before you spend money on food, drinks, and an outfit for the pre-game tailgate.

You only have four to six years to make long-lasting relationships in college that could affect the rest of your life, so it’s understandable to feel pressure to attend parties, hang out at bars, go to dinners, and other activities. However, you could go broke or get into debt if you’re not careful.

Look for free or low-cost events to attend, then be selective about which events and activities are worth it for your budget. Keep an eye on your spending and always ask if you can save money on meals, clothes, or events with a student ID discount. You might get teased for seeming “cheap,” but you could avoid putting these expenses on a credit card.

Health insurance and medical costs

If you do not get health coverage through your parents, some schools may require you to sign up for a health plan. For example, New York University automatically enrolls students in its school-sponsored health care plan, but students can waive the plan if they can provide evidence they maintain alternate health insurance coverage that meets the university’s minimum health insurance criteria.

The cost of a basic plan for the spring 2017 semester: $1,654. If you’re an out-of-state student and don’t find alternative insurance coverage in time for classes, you could be stuck paying the bill as “NYU requires that all students registered in degree-granting programs maintain health insurance.”

Shop around to be sure you’re getting the best coverage at the best price possible. That may mean going outside of your school’s designated plan. You might want to consider signing up for coverage in the federal government’s Health Insurance Marketplace or your state’s equivalent insurance marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Featured, How to Complain, Strategies to Save

Debt Buyers Reveal Just How Far They’re Willing to Go to Settle Unpaid Debts

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Tens of millions of Americans are pursued by debt buyers, speculators who buy the rights to collect their overdue bills. Yet few consumers realize this growing segment of the collection industry may offer them a chance to slash their delinquent debts by as much as 75%.

A MagnifyMoney investigation examined the business practices of debt buyers as detailed in disclosures to their investors. Here’s how the game is played:

  • Buyers purchase massive bundles of unpaid consumer debts with face values that often total billions of dollars. Those are the bills that banks, credit card companies, and other creditors give up trying to collect.
  • Those debts are bought at deeply discounted prices, averaging roughly 8 cents on the dollar.
  • The buyers only expect to recover a fraction of the original amounts owed. Their target is to recover from 2 to 3 times more than they paid.

The bottom line: Debt buyers can turn profits that meet their goals by collecting merely 16% to 24% of the original face values. That knowledge can be useful to savvy debtors who choose to negotiate a settlement for less.

Debt buyers “absolutely” have more flexibility in negotiating with consumers, says Sheryl Wright, senior vice president of Encore Capital Group, the nation’s largest debt buyer. Encore offers most debtors a 40% discount to settle, according to the company’s website.

“There could be an advantage in terms of negotiating a favorable settlement,” says Lisa Stifler of the Center for Responsible Lending, a nonprofit consumer advocate. “Debt buyers are willing to – and generally do – accept lower amounts.”

Stifler warned that debtors should be cautious in all interactions with debt buyers and collectors. (See “Tips to fight back against debt buyers and debt collectors” later in this article.)

In the world of debt buying, the numbers can vary. The price of bad debt portfolios ranged from 5 to 15 cents on the dollar during the past two years, according to corporate disclosures of debt buyers. The variables include the age of debt, size of account, type of loan, previous collection attempts, geographic location, and data about debtors – plus shifts of supply and demand in the bad debt marketplace.

What remains constant is the debt buyers’ goal of recovering 2 to 3 times more than the purchase price they pay for the accounts.

It is a different business model than that of traditional debt collection agencies, contractors that pursue bills for a percentage of what they recover. In contrast, debt buyers may often be more willing to wheel and deal to settle accounts with consumers.

Debt buyers raked in $3.6 billion in revenue last year – about one-third of the nation’s debt collections, according to the Consumer Financial Protection Bureau’s latest annual report.

Information is scarce on the inner workings of hundreds of debt buyers who operate in the U.S. An accurate count is not available since only 17 states require buyers to be licensed.

Of the more than 575 debt buyers that belong to the industry’s trade association, only three are publicly traded entities required to file disclosures last year with the federal Securities and Exchange Commission. MagnifyMoney looked into reports from two of those companies and found telling insights into an industry typically secretive about its practices.

An “Encore” of unpaid bills

Encore owns nearly 36 million open accounts of consumer debt in the U.S. through its subsidiaries Midland Credit Management, Midland Funding, Asset Acceptance, and Atlantic Credit & Finance.

During 2016, Encore invested $900 million to buy debt with a face value of $9.8 billion – or 9 cents per dollar. On average, the corporation recovers 2.5 times more than it pays for debt portfolios – the equivalent of 22.5 cents per dollar owed, according to its annual report to the SEC.

In that disclosure, the San Diego-based operation details how it tries to get debtors to pay.

Encore boasts that its proprietary “decision science” enables it “to predict a consumer’s willingness and ability to repay his or her debt.” It obtains “detailed information” about debtors’ “credit, savings or payment behavior,” then analyzes “demographic data, account characteristics and economic variables.”

“We pursue collection activities on only a fraction of the accounts we purchase,” stated Encore. “Consumers who we believe are financially incapable of making any payments … are excluded from our collection process.”

The rest of the debtors can expect to hear from Encore’s collectors. But the company knows most won’t respond.

“Only a small number of consumers who we contact choose to engage with us,” Encore explained. “Those who do are often offered discounts on their obligations or are presented with payment plans that are intended to suit their needs.”

While the company offers most debtors discounts of 40% to settle, relatively few take advantage of that opportunity.

“The majority of consumers we contact do not respond to our calls and letters, and we must then make the decision about whether to pursue collection through legal action,” Encore stated. In its annual report, the company disclosed it spent $200 million for legal costs last year.

In a written response to questions from MagnifyMoney, Encore refused to reveal the number of lawsuits it has filed or the amount of money it has recovered as a result of that litigation.

“We ultimately take legal action in less than 5% of all of our accounts,” says Wright. If Encore has sued 5% of its 36 million domestic open accounts, the total would be roughly 1.8 million court cases.

Portfolio Recovery Associates has acquired a total of 43 million consumer debts in the U.S. during the past 20 years. Behind Encore, it ranks as the nation’s second-largest debt buyer.

Its parent company, PRA Group Inc. of Norfolk, Va., paid $900 million last year to buy debts with a face value of $10.5 billion – or 8 cents on the dollar, according to its 2016 annual report. Its target is to collect a multiple of 2 to 3 times what it paid.

It is a high-stakes investment. The company must satisfy its own creditors since it borrows hundreds of millions of dollars to buy other people’s unpaid debts. PRA Group reported $1.8 billion in corporate indebtedness last year.

PRA Group declined an opportunity to respond to questions from MagnifyMoney. In lieu of an interview, spokeswoman Nancy Porter requested written questions. But the company then chose not to provide answers.

Asta Funding Inc., the only other publicly traded debt buyer, did not respond to interview requests from MagnifyMoney.

Tips to fight back against debt buyers and debt collectors

All types of bill collectors have a common weakness: They often know little about the accounts they chase. And that’s a primary reason for many of the 860,000 consumer complaints against collectors last year, according to a database kept by the Federal Trade Commission.

Be sure the debt is legitimate first

In dealing with collectors, you should begin by questioning whether the debt is legitimate and accurate. You can also ask who owns the debt and how they obtained the right to collect it.

In 2015, Portfolio agreed to pay $19 million in consumer relief and $8 million in civil penalties as a result of an action by the CFPB.

“Portfolio bought debts that were potentially inaccurate, lacking documentation or unenforceable,” stated the CFPB. “Without verifying the debt, the company collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.”

One unemployed 51-year-old mother in Kansas City, Mo. fought back and won a big judgment in court.

Portfolio mistakenly sued Maria Guadalujpe Mejia for a $1,100 credit card debt owed by a man with a similar sounding name. Despite evidence it was pursuing the wrong person, the company refused to drop the lawsuit.

Mejia countersued Portfolio. Outraged by the company’s bullying tactics, a court awarded her $83 million in damages. In February, the company agreed to settled the case for an undisclosed amount.

Challenge the debt in writing

Within 30 days of first contact by a collector, you have the right to challenge the debt in writing. The collector is not allowed to contact you again until it sends a written verification of what it believes you owe.

Negotiate a settlement

If the bill is correct, you can attempt to negotiate a settlement for less, a sometimes lengthy process that could take months or years. By starting with low offers, you may leave more room to bargain.

Communicate with collectors in writing and keep copies of everything. On its website, the CFPB offers sample letters of how to correspond with collectors.

As previously noted, debt buyers generally have more leeway to negotiate settlements since they actually own the accounts. A partial list of debt buyers can be found online at DBA International.

In contrast, collection agencies working on contingency may be more restricted in what they can offer. They need to collect enough to satisfy the expectations of creditors plus cover their own fee.

As part of a settlement, the debt buyer or collector may offer a discount, a payment plan allowing the consumer to pay over time, or a combination of the two.

“Through this process, we use a variety of options, not just one approach or another, to create unique solutions that help consumers work toward long-term financial well-being and improve their quality of life,” says Encore’s Wright.

A settlement doesn’t guarantee the debt will be scrubbed from your credit report

To encourage settlements, Encore recently announced that it would remove negative information from the credit reports of consumers two years after they paid or settled their debts. Traditionally, the negative “tradelines” remain on credit reports for seven years.

“We believe the changes in our credit reporting policy provide a tangible solution to help our consumers move toward a better life,” says Wright.

However, Encore’s new policy does nothing to speed up the removal of any negative information reported by the original creditor from whom the company bought the debt.

Check your state’s statute of limitations on unpaid debts

Before any payment or negotiation, check to see if the statute of limitations has expired on the debt. That is the window of time for when you can be sued; it varies from state to state and generally ranges from three to six years.

If the statute of limitations on your debt has expired, you may legally owe nothing. If the expiration is nearing, you can have extra leverage in negotiating a settlement. But be careful: A partial payment can restart the statute in some states and lengthen the time a black mark remains on your credit record.

Respond promptly if the company decides to sue

If you are sued over the debt, be sure to respond by the deadline specified in the court papers. If you answer, the collector will have to prove you owe the money.

If you don’t timely answer the complaint, the burden of proof may switch to you. A judge may enter a default judgment against you – or even sign a court order to garnish your paycheck.

Seek help from a lawyer or legal aid service if you have questions, but be careful of where you turn for help. The CFPB warns consumers to be wary of debt collection services that charge money in advance to negotiate on your behalf. They often promise more than they can deliver and get paid no matter what happens.

Mark Lagerkvist
Mark Lagerkvist |

Mark Lagerkvist is a writer at MagnifyMoney. You can email Mark here

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Featured, Life Events, News, Strategies to Save

How Much Should I Spend on a Wedding Gift?

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When Alston Waldrip was in law school and money was tight, she thought creatively about how to buy wedding presents. For one couple, she bought a cast iron skillet for $15 and hand-decorated a sign with their last name. For another, she and several female friends each contributed $20-$25 for a bedding set.

Waldrip, now an attorney in Gainesville, Ga., kept all that in mind when she picked items with a range of prices for her November 2017 wedding registry. The lowest starts at just $16, for a bottle opener from Anthropologie.

“I would feel so guilty if someone were to pay out of their means for me,” Waldrip says. “I try to be really respectful of that.”

But how much money should you spend on a wedding present for someone? And how do you balance that cost with the other financial investments associated with attending a wedding?

Spending Guidelines: Replacing Something Old with Something New

One old gift-buying rule you can ignore is to spend as much as the cost of your plate at the reception, plus the cost of your guest’s meal, if you bring one. Nancy Mitchell, founder of The Etiquette Advocate, an etiquette training and consulting firm in Washington, D.C., says she thinks using this guideline is a mistake.

“How in the world would you know how much someone is spending on the reception and the per-person cost for the reception?” she says.

The Knot, a wedding-planning website, conducted a survey of 15,000 brides and suggested people spend $50 to $75 for co-workers and distant friends and family, $75 to $100 on friends and relatives, and $100 to $150 on close friends and relatives.

A 2016 survey by FiveThirtyEight.com polled over 1,000 people and found that, on average, people spent $50 on friends, $82 on close friends, $71 on extended family, and $147 on close family.

Mitchell says these numbers are reasonable, but emphasizes that outlining exactly how much to spend is difficult since each person’s income and resources will differ.

“I probably range from $30 if I don’t know them very well, to $50 to $75 if I know them a little better, at this point in my life,” Waldrip says.

If you’re invited to the wedding of someone with a much higher income — your boss, for example — don’t think about how much that person could afford to spend on a gift for you. Follow the general rule to spend within your means, Mitchell says.

Create a Gift Budget

Many millennials are at a point in their lives when it seems everyone they know is getting engaged, getting married, or getting pregnant. Dominique Broadway, a financial planner in Washington, D.C., who works with millennials, says setting up a monthly gift budget can prevent you from overspending.

“You need to figure out what works for you and don’t try to force yourself to walk in with the biggest, grandest gift,” she says. “You need to figure out what you can actually afford.”

Broadway says to sit down and figure out exactly what your expenses are every month and determine how much of your leftover income should be allocated to gifts for weddings, as well as baby showers and birthdays. The gift amount could be anywhere from $25 to $100 a month, depending on your financial situation.

“Buy your gift in advance if you are going to buy a gift,” Broadway added. “I think a lot of times the reason people overspend is because they’re literally picking something up on the way to the wedding.”

Kate Zepernick and her husband, Trey, attended 12 weddings last year. Zepernick, founder of TheBrideBoss.com, a website that helps brides set up wedding budgets, says she has a monthly gift budget. She purchases gifts ahead of time so she’s actually using that money each month.

“Even if a wedding is in July, I may not have a wedding in April and I may go ahead and purchase a gift for that July wedding in April so I drain that portion of my budget,” Zepernick says.

Allocate Travel Funds Early

In addition to buying the present, wedding guests may have to spend more on hotels and travel, such as airfare or gas, if the wedding is out of town.

A 2016 American Express survey of 1,800 people found that, on average, Americans attend three weddings a year and spend about $703 on each. Millennials, as a cohort, spent about $893 per wedding. And millennials who were in a wedding spent closer to $928.

Broadway says if you know you’re going to have to travel for a wedding, start researching the costs and setting aside money as soon as you get the save-the-date. She recently worked with a client who was going to travel to a wedding in September, another in October, and another in November. They worked together to figure out a ballpark figure of what each wedding would cost so the client could start saving right away for not just the travel but also the gifts.

Zepernick, who lives in Atlanta, says she starts planning even earlier by keeping an eye on social media.

“I keep a mental note when I see someone get engaged and I think I’ll be invited,” she says. “I try to keep a mental note: ‘You’re from Atlanta, that’s not going to be travel for me. OK, you’re from Ohio, that will be travel.’”

Calculate Wedding Party Costs

If you’re in the wedding party, costs like the bridesmaid’s dress, tuxedo rental, and travel to the bachelor or bachelorette party can add up even further. Don’t forget about potentially spending on pre-wedding gifts.

A 2015 American express survey found on average Americans treated their closest friends and family members well by spending $77 for bridal shower gifts, $86 for bachelorette/bachelor party gifts, and $89 for engagement party gifts.

Mitchell says proper etiquette does call for bringing a separate gift to the wedding. But if you’re buying additional gifts for the couple throughout their engagement, it’s OK to spend a little bit less on the actual wedding present.

“It just does not have to be the most expensive thing on the wedding registry,” Mitchell says.

Contributing to a group gift from the wedding party can also help you save money while making sure the couple receives a big-ticket item from their registry.

Zepernick, who is a maid of honor in a friend’s upcoming wedding, says she’s been “showering her with gifts throughout her entire engagement period.”

“It’s more important to me to be kind of consistently doing that than to kind of blow it all on a big gift at the end,” she says.

Jeanette Kazmierczak
Jeanette Kazmierczak |

Jeanette Kazmierczak is a writer at MagnifyMoney. You can email Jeanette here

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How the 72-Hour Rule Can Help You Save Money

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Clock time deadline

How often do you make an impulse purchase, only to regret it the next day?

Journalist and money expert Carl Richards  came up with the “72-hour rule” to kick his habit of buying every book he wanted on Amazon, ending up with a pile of unread books.

Now, he says he lets a book sit in his shopping cart for at least 72 hours before hitting “buy,” and he’s saving money only buying books he will actually read. You can apply a similar practice to your spending habits.

Why wait 72 hours?

Our brains respond positively to instant gratification. It’s why so many of us find it difficult to save money or lose weight. We want the item or food now, and when there’s nothing stopping us, why wait?

You need the space between receiving the money and spending it to think. The shorter that space is, the less time you have to think and the more likely you are to spend the funds impulsively.

Tax refunds are a prime example of a time when it can be tricky to control your urge to spend. Tax refunds averaged $2,860 in 2016, according to the IRS. This year, a SunTrust survey found about 1 in 4 Americans already planned to spend their refund money on a large purchase before they even received the funds. That proportion rises to 36% among millennials and 40% among Gen-Xers, according to SunTrust.

“People often look at their tax refund as found money like lottery winnings or inheritance. The temptation to spend surprise money on something fun or frivolous is strong,” says Denver, Colo.-based Certified Financial Planner Kristi Sullivan.

You want to avoid doing that. Your tax refund isn’t lottery winnings or an inheritance. It’s your hard-earned money being returned to you with no interest gained.

That’s not great, considering the average citizen admits they can’t pull together $400 in case of an emergency.

James D. Kinney, a financial planner in Bridgewater, N.J., says “hitting the pause button on spending impulses gives the rational brain time to think” of more practical ways to use the money like getting out of debt, contributing to a college savings fund, or adding to your savings.

Although he acknowledges when you’re living paycheck to paycheck, it’s a little harder to resist a sudden — albeit predictable — boost to this month’s budget.

“People feel constrained by their paycheck all through the year, then suddenly this windfall of money gives them the ability to splurge. The temptation can be hard to resist,” says Kinney.

Here are a few ways you can manage the temptation, and the time.

Make your priorities clear

Once you know what your financial goals are — whether they are saving up for a new car or paying down student debt — the key is to look at every financial choice and determine whether or not it will help or hurt your progress toward that goal.

“A need that you haven’t already bought is rare. Wants are everywhere. Time to reflect might have you making a more mature decision with your money,” says Sullivan.

Do some soul searching to see where your financial priorities lie. You might find your need to pay off your credit card this month to avoid paying more in interest outweighs how badly you want that new gadget. Think about it.

Emergency fund and debt comes first

“Sit down and think about other pressing financial issues, and how you plan on paying for them,” says David Frisch, a Melville, N.Y.-based financial planner. He suggests you review bank statements, brokerage accounts, long-term goals, and other financial considerations, then give some thought to whether or not you’re on track to achieve them.

For example, if you realize you don’t have enough in your emergency fund to cover three to six months of expenses, you might decide to put the money there instead of spending it. Or, if your refund could completely pay off a high-interest debt like a credit card, you might decide to free yourself from the debt burden.

Treat yourself

Holding back on purchasing something you really want can be painful, but it doesn’t have to be complete torture. Sullivan suggests taking the edge off with a small reward for each day you wait. It’s a lot like crash dieting, which experts agree never works. If you deprive yourself of too many small pleasures for too long, you might see a donut one day (or maybe that new iPhone) and not just buy one but the whole dozen. But if you have a treat once in awhile, you might not be as likely to binge later.

Just make sure the reward you choose isn’t too expensive, and you should avoid getting into more debt. Your “reward” could serve as a break while you comb through your finances.

The takeaway

Take some time to think before spending whenever you receive unexpected income, and you might make better spending decisions. Maybe you need only 24 hours, instead of 72, or maybe you need a little longer to decide what to do with money, but the same lesson applies. If you’re considering a purchase that’s a “want” and not a “need,” think before you buy.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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How to Save on Your Next Family Vacation

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With spring and summer breaks imminent, many families are already planning their vacations. A 2013 report by American Express puts the average cost of vacation for a family of four at $4,580.

But for most, that’s not an affordable family vacation. With many Americans in large amounts of debt, barely saving for retirement, and unable to cover a $400 emergency, spending $4,000 on a vacation is simply not an option.

That doesn’t mean you should give up on family vacations altogether.

Vacations are a great way for families to bond and spend time with one another. On top of bonding, it’s been noted that people who take time off from work are more productive and enjoy a greater sense of health and wellness overall.

There’s pretty compelling evidence that a family vacation is worth the money, but unless you can get around the hefty price tag, it might be a luxury families will have to forgo. If your family is looking for a budget-friendly trip that won’t require a vacation loan, you might want to consider some of these affordable family vacation options.

National and State Parks

National and state parks are perhaps some of the most under-recognized destinations in the country. Though a Caribbean vacation might seem more luxurious, a visit to a national or state park can compete on so many levels.

 

Each park varies on pricing, but day passes can start at $20 per person while campsite rentals can be as low as $15 per night.

When it comes to bang-for-buck, these picturesque park sites have so many options for activities that you’ll end up having to choose. Hiking, camping, rafting, and sightseeing are just a few of the low-cost, family-friendly things you’ll find to do.

The draw of national and state parks is in the wide variety and flexibility of the grounds. You will find parks with a variety of climates, landscapes, natural features, and accommodations. If you want something super-rustic, you’ll probably save more money sleeping outside in tents and cooking your own food over a campfire. If you prefer “glamping” or glamorous camping, there are parks with luxury-type cabins and lodges as well.

The key is finding a location that suits your family size, interest, and personality. A little research can help you find the perfect combination of affordability, proximity, and fun.

Stick Close to Home

No matter where you live, chances are you’re close to some place worth visiting by car, train, or bus. If you can’t spring for $350-per-person plane tickets, then driving four to five hours to a destination might be more palatable — and affordable.

What you save on airline tickets could be used toward experiences, meals, and nicer accommodations. Depending on where you live, you might find a nearby farm, amusement or water park, bed and breakfast, or beach that could be just as satisfying as that $4,000 vacation.

You could also stay hyper-local and explore your hometown or neighboring communities. Check with your city or county visitors’ bureau to learn more about local attractions and activities. There are also sites like TripAdvisor, Groupon, and Airbnb experiences that help local visitors find activities and tours according to interests. You’ll find specially curated experiences for small groups, large groups, or families, or arranged around activities like cycling, gastronomy, sightseeing, or crafting.

With the rise in these “microtour” offerings, your family may even be introduced to your very own neighborhood in a different way. More than likely, there are tons of things you haven’t yet explored right in your own backyard. You could stay at home for your local experience or in a nearby hotel for a true “getaway” feel.

Visit with Relatives

Haven’t seen Grandma and Grandpa in a while? Make it a vacation! Visiting with relatives like grandparents can mean intergenerational quality time plus savings on things like food, entertainment, and lodging. Even if your aunts and uncles live in the middle of nowhere, you can plan activities centered around family meals, outings, and games.

A family game night out in the country under the stars can be just as exciting as an all-inclusive cruise or resort stay. Movie night with cousins can be fun with snacks while catching up on old times. With a little creativity, you can make a visit with your kinfolk into an epic family vacation that won’t break the bank.

And the real perk? You can save hundreds if not thousands of dollars by crashing with family versus staying at pricey hotels.

Volunteer + Vacation

Family volunteer vacations are increasing in popularity as people want to engage in purpose-centered travel. Many families desire to give their children a sense of perspective via traveling so they can interact with people of different backgrounds, races, income levels, and types of upbringing. A volunteer vacation can be the perfect way to give back, enjoy family time, and save a little money at the same time.

The types of volunteer vacations will vary in focus, pricing, activities, and accommodations. Some programs will provide free or extremely low-cost lodging in exchange for service, but will not necessarily cover travel costs.

If your family is open to working with people or nature, there are some volunteer opportunities that might appeal to you. Farming, in particular, seems to have many opportunities for 1-2 week commitments, but there may be age restrictions for younger members of your family.

Working Weekends on Organic Farms (WWOOF) is a network of organic farming sites with over 160 worldwide locations and volunteering opportunities. You’ll have to choose a site and arrangement that would work for your family. You’ll explore listings to find hosts that can accommodate your lodging entirely or at a deep discount.

Websites like Workaway can easily connect you to host families abroad needing help for specific tasks and time periods. Each listing for housing and help will describe the volunteer commitment along with the types of accommodations available in exchange for that work.

Though prepackaged volunteer vacations and networking websites are a good place to start when researching options, don’t be afraid to arrange your own service outing. If you have the time to make phone calls and send emails, it might be worth the effort to create a unique experience designed to serve others that your entire family can take part in.

Go Where the U.S. Dollar Is Strongest

Lastly, you might consider traveling to places where the cost of living is relatively inexpensive. A favorable exchange rate plus a low cost-of-living index could help you vacation like royalty in some places.

The only caveat to this approach is that travel to some places can get very expensive. However, if you are strategic, you can use credit cards that offer travel reward points and miles or cash back to use toward travel to help offset some of the travel costs for your family.

Traveling to an affordable destination would be ideal if you plan to have a longer stay or take a deep dive into local food, activities, or amenities. If your family of four can vacation well on $50-$100 a day or less, it might be worth the plane ticket to get there.

For example, going to a country in South or Central America or the Caribbean could save you tons. Low exchange rates and low-priced accommodations could give you plenty of wiggle room to dine well and participate in varied experiences that would be more expensive elsewhere.

In Cuba, there are fairly nice accommodations that could start as little as $25 per night for an entire apartment rental. Though the convertible peso is pegged to the dollar, the national money is at a ratio of 25 to 1 USD. At this exchange rate, you can get upscale dining options for less than $5 per person.

There are many low-cost activities like walking tours or people watching in one of the many town squares in Old Havana. The museums are plentiful, educational, and interesting. It’s not uncommon to find live music in restaurants or at popular gathering places. Plus, nearby beaches are beautiful with many inexpensive options for dining and snacks.

Costa Rica is becoming a popular destination because it’s easy and affordable to reach from the U.S. One of the most biodiverse places on the planet, it has almost unlimited options for cheap, family-friendly excursions. The national parks are accessible by inexpensive bus rides and can be explored for little to nothing in terms of self-guided or guided tours. A search for lodging on a site like Expedia or Airbnb will produce many results for under $100 per night that can accommodate families of up to 4-5 people.

The whole point of the family vacation is to spend time together, bond, and create lasting memories. If you are flexible and creative, you’ll find that you don’t have to spend a lot of money to make that happen.

Aja McClanahan
Aja McClanahan |

Aja McClanahan is a writer at MagnifyMoney. You can email Aja here

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What To Do if Your Insurance Doesn’t Cover a Health Care Provider

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Smiling senior man having measured blood pressure

It’s a pretty common scenario: you’re looking to book a medical appointment, so you go to your insurance company’s website to find an in-network doctor. You book the appointment, see the doctor, and all seems well — until you get a whopping bill. Apparently, that doctor wasn’t in your network after all, and now you’re faced with out-of-network charges.

This happens more often than we think. Unfortunately, insurance company websites are notoriously fallible. Not only that, but they change so frequently that it can be difficult to nail down just who is and isn’t covered. At some point or another, just about everyone will have to deal with a situation where their insurance doesn’t cover a provider.

It’s easy to feel duped in this scenario. Navigating the ins and outs of insurance is hard enough, but there’s nothing more frustrating than being fed incorrect information.

So what should you do?

What to Do If You’ve Already Gotten the Bill

Call the doctor

Doctors don’t usually consider themselves responsible for significant out-of-pocket costs resulting from a lack of research on the part of the patient.

But if you asked the doctor or their representative about insurance coverage beforehand, you should contact them immediately if that information ends up being false. Many physicians will honor the price they initially told you or at least give a hefty discount. Don’t get discouraged if they don’t get back to you right away. Keep calling to see if you can get a lower price.

Negotiate and ask for a better rate

Most doctors have two different rates: one for insurance companies and one for self-pay individuals. If your doctor’s visit isn’t going to be covered by your insurance, call the doctor’s billing department to ask for the self-pay cost.

“Most physician offices will accept a lesser amount, especially if they know the service is not going toward a deductible,” said health insurance agent Natalie Cooper of Best Quote Insurance of Ohio.

Ask about a payment plan if you can’t afford to pay the bill in one go. Most medical offices would rather get the money a little bit at a time than not at all.

“Most physician and hospital groups will accept a small payment of $25 or $50 per month until it’s paid off,” Cooper said.

Use a health savings account

If you’re struggling to pay a medical bill out of pocket, see if you can open an HSA and use those funds to pay for it. If you owe $2,000, you can transfer $2,000 to an HSA and then pay the doctor directly from that account.

What’s the benefit? HSA contributions are deductible on your taxes. Unfortunately, only people with high-deductible plans are eligible to start an HSA. Individuals can only contribute up to $3,400 a year or $6,750 in an HSA. You can start an HSA anytime if you have an eligible healthcare plan.

The IRS says you can only use your HSA to pay for qualified medical expenses, a list of which you can find here. Funds in an HSA roll over from year to year, and you can contribute up to $3,400 annually or $6,750 for families.

You can also open a Flex Spending Account, which works similarly to an HSA. However, funds don’t roll over to the next year and users can only contribute $2,550 a year.

How to Prevent Out-of-Pocket Expenses

Ask beforehand

Many people use the insurance company’s website to find a doctor, but those lists are often out of date. Insurance information can even change daily. The only way to confirm a doctor’s status with an insurance company is to call them directly and ask if they’re a network provider — not just if they accept your insurance.

“When they are a network provider, they are contractually required to accept no more than the negotiated contracted rate as payment in full, which is usually less than the billed rate,” said human resources expert Laurie A. Brednich. “When they say they ‘accept xyz insurance,’ they are usually not a network provider, but will file the claims on your behalf, and you are responsible for the full billed charges.”

It can also be helpful to give them your insurance group and account numbers beforehand so there’s no question about your specific policy. The more specific you can be, the more accurately you’ll be able to navigate the insurance labyrinth.

Find out if all procedures and doctors are covered

Have you ever been to a doctor who’s recommended you see a specialist for a certain procedure — only to find out that the specialist isn’t covered by your insurance, even though they’re in the same building?

When a doctor recommends you to a colleague, they’re not confirming that the other physician is covered in-network. Before you make the appointment, talk to the billing department to see what their policies are. You can request an estimate in writing beforehand so you’ll have an idea of what the costs will be.

Some procedures might not be covered even if they’re being ordered by your in-network doctor. If your doctor sends your results to a lab, that lab might be out of network, even if your insurance covers the doctor who ordered them.

Confirm the lab’s status before you go in. If it’s too late, call your insurance and ask if they can bill the service as in-network. Cite the fact that you weren’t aware the lab would not be covered.

If they refuse, contact the doctor’s office and explain your situation. Ask them why they used an out-of-network provider and see if they’re willing to write off the bill. Be polite, but firm.

Ask the doctor to apply

When Julie Rains’ insurance changed to a preferred provider plan, she discovered her trusted doctor was now going to be out of network. Instead of searching for a replacement, she asked if her physician would apply to the insurance company to be covered by her new plan. He agreed.

It took almost two months for him to be accepted, Rains said. If you’re going this route, it’s best to start as soon as you find out your insurance company has changed policies. Rains said between the time she found out about the changes and when they went into effect, her doctor had already been approved.

You might have less luck with a doctor you’ve only been seeing for a short time, but most medical professionals take long-term patient relationships seriously — especially if your whole family goes to the same office. As always, it doesn’t hurt to ask.

Zina Kumok
Zina Kumok |

Zina Kumok is a writer at MagnifyMoney. You can email Zina here

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