Lazy Man and Money

Bubbles, Bubbles, Bubbles

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That title isn’t just what my wife sings while at the Bubble Lounge in San Francisco or while in a spa… it’s the topic of today’s article.

Earlier this week, I said I was going to try to be more positive. So before I get into some heavy negative stuff, I feel it’s worth reflecting how awesome life is. It’s not lost on me that I’m part of small percentage of the privileged few in a privileged country. We carry awesome computers with us that have almost any information that people want. We can tell our Amazon Echo to play Jack Johnson and instantly be happy. (Or maybe that’s just me.)

Sometimes I think the negative stuff stands out to me like a sore thumb because of the sharp contrast with all the awesomeness of everything else? What’s that phrase that people use nowadays, “first world problems”? Exactly.

I want everyone to have all the awesomeness and none of the bad stuff. And a lot of that awesomeness comes with money and financial freedom. When I see people or business taking that away from people, it makes me sad… very sad. No one likes a sad, Lazy Man.

Let’s Get to the Bubbles

I’m not really sure if these really meant the definition of “bubbles”, but that’s kind of the road I went down. One might also call it capitalism running amok without regulation… or at least “timely” regulation.

Cable Companies and Bundling

Yesterday, I wrote my experience with Cox cable/Internet pricing. In case you missed it, they seem to automatically assess a $25 fee for a declined credit card. In addition, they require products that some consumers don’t want (me in this case) to get a “bundle deal.” When that expires consumers who fail or forget to complain feel the pain of raised prices. For what it’s worth the FTC does have a page about bundled communication services, but it looks like it really isn’t a priority for them at this time.

I got several comments and not one was in support of Cox or their cable company. Many claimed that because they have a monopoly in their area (like Cox in mine) and lack choice, the pricing just keeps going up and up. I’d say that’s an example of capitalism run amok without regulation. In fact, a few people commenting openly wished regulators would step in.

In the meantime, is it wrong for Cox, or any other cable company, to make as much money as it can? It’s in the business to make money, right? If tactics that some described as “shady” makes them more money that’s just the business doing business stuff, right? I don’t agree with this thinking.

Housing Market in 2008

This is an easy and famous bubble, right? We saw housing prices go up and up. At least part of the reason was because mortgages were easy to get. And as prices of homes got higher, banks created new mortgages to keep putting people in homes. You can reduce the monthly payments on house by making offering a 50-year, interest-only mortgage.

I wonder how many people are still digging out of that mess. The condo I bought in 2005 is worth about $50,000 less than what I paid for it. That’s kind of a big deal, right?

Student Loans

I haven’t followed student loans too closely as I’m passed that age (Thanks for the scholarship, Brandeis!) and my kids are in pre-school. However, it seems to me that colleges have been regularly raising prices (similar to the home market above) and using a similar idea to the new mortgages… people will just get more financial aid.

Medication (such as EpiPens)

I’m sure you haven’t missed the news of late, but prices of medication are drastically shooting up as well. It’s rarely that the products are better or more effective. Instead we find the same kind of passing of the buck as above. In this case, insurances cover some of the cost, so the medications may not seem as expensive, but the result has been raising insurance premiums.

Multilevel Marketing Scams

I’ve covered these extensively in the past. This isn’t exactly like the above products, because you can simply choose not to buy the products, and it doesn’t hurt that like not having a home, education, internet, or medication. Instead, companies found a way to sell hundreds of thousands (maybe millions) of consumers things like $45/bottle juice or $70/bottle salt water make outlandish health claims by its salesforce and bundling the purchase with a “business opportunity” in selling products via an artificially closed market.

What Can We Do?

In all these cases, I’m not exactly sure what we can do. Congress and the FTC are looking into one or more of these areas, but it seems like all they do is talk. I don’t see any meaningful action.

In the meantime, it seems we are left to fend for ourselves as best we can. We try to stay healthy to avoid rising medical costs. We say “no” to $45/juice and MonaVie goes out of business. We decide to look into ways that we can eliminate our cable package. We look schools that present better “value” rather than the very best education.

It’s not ideal, but it’s your money and in the end, you are the only one who can protect it.

So You Have a Huge Student Loan (Like Me), Here Are Your Options

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[Editor’s Note: I’m still shoveling out of two feet of snow, so today we have a guest post from Grant Biles, the co-founder of Gradible. The company helps people on how to eliminate student loan debt. The following is his guide on what students can do to pay off their loans. I’m often offered guest posts that are very self-serving, so it is refreshing that some of the suggestions don’t require the use of his company’s services. Hopefully tomorrow, we’ll get back to our regularly articles.]

Options

I’m one of the more than 40 million Americans who holds student loan debt, and if you’re reading this, I imagine you or someone you love does, too. Two out of 3 undergraduates leaves school with student debt these days, and the average graduate has more than $30,000 in student loan debt.

In my role as a co-founder of Gradible, a platform that helps people with student loan debt pay it back faster, I have talked to thousands of graduates across the country about their different situations and needs regarding student debt. The two biggest takeaways from these conversations are that student loan debt situations are varied and most people want to manage the repayment of their debt in a balanced way: they want to continue to have a fulfilling life, while also eliminating the debt as quickly as possible.

My team and I have done extensive research and found many of the most effective and helpful options for the variety of different situations that student loans present their holders. If you’re staring down a huge monthly student loan payment and wondering how you’re going to afford all your necessities, or just want to eliminate the small amount of debt you took on as quickly as possible, we’ve found answers and options for you.

Options for Managing and Repaying Your Student Loans

  • Modifying Repayment Terms

    The direct impact of student loans is not the total balance, it’s the monthly obligation that must be balanced with all of life’s other necessities and nice-to-haves. Additionally, there are many ways through which you will be able to reduce your student loan payments over time.

    We have found that, especially for recent graduates still working their way up the salary ladder, Income Based Repayment is a very helpful tool. This pegs your monthly payment at 10% of your take-home pay. You can file for it at the link above. The downside of this program is that by reducing the monthly payment, you naturally are extending the repayment lifetime and therefore the total amount of interest you will pay. If you are unemployed, have had trouble finding a job, or been very ill, you can also work with your student loan servicer to enter forbearance or deferment. These programs stop the repayment of your loan for a fixed amount of time, if you qualify. Again, the catch here is that your repayment lifecycle increases, because interest continues to accrue in almost all situations.

  • Student Loan Repayment Services

    My company, Gradible, offers a variety of flexible ways to earn your way out of debt faster and manage your monthly payments. We source offers from businesses such as cashback deals on shopping, surveys and studies, short freelance projects, and more, that you earn credits for completing. We then redeem these for you directly to your student debt. We’ve helped graduates pay off more than $200,000 in student loans in the past year, and we’d love to help you, too. Another service that offers cash back to your student loans is SmarterBucks. Check out these two websites to begin accelerating your rate of repayment.

  • Part-time work

    When you think of part-time jobs, your mind likely goes to the old standards: manual labor, restaurant and bar work, or retail. All of these options can provide you with extra cash to meet liabilities like student loans. Additionally though, in our modern, smartphone-driven age, there are a variety of more flexible opportunities that could be more appealing to earn the extra cash you seek. Here are just a handful of the most popular:
    You can drive an Uber or a Lyft.
    You can deliver packages as a Postmate.
    You can do odd jobs as a TaskRabbit.
    You can pick up and deliver groceries for Instacart.

  • Refinance your loans or get them forgiven

    If you qualify (and full disclosure this is last because so few people do) for the following programs, they can significantly reduce your monthly payment and total amount you repay. CommonBond and SoFi offer refinancing for graduate degrees, but have stringent criteria for income, occupation, and degree type. LendKey also offers consolidation and refinancing products. If you qualify, these are a great way to reduce your interest rates and monthly payments, but the reality is that very few people will qualify for this, due to income and debt levels. Credible is a great site if you want to compare all of your refinancing options in one place.

    If you are currently working in a public service capacity, the Public Student Loan Forgiveness Program is something you definitely should consider. This program helps teachers, firefighters, police, public defenders, and other civil servants reduce monthly payments in a similar manner to Income Based Repayment (10% of monthly take-home pay), and it qualifies you to have your loans completely forgiven after 120 consecutive on-time monthly payments.

This list is not exhaustive, but it does present you with most of the options we’ve found. I’m obviously biased, but I think Gradible makes the most sense for the most borrowers, so give us a shot, and I hope this guide is helpful. Good luck getting to zero.

Dispelling Common College PF Myths

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studenomics_logoToday’s guest post comes from Studenomics, a blog that tries to help younger people reach financial independence. It’s actually part one of a two part series, so when your done, you’ll want to click through to Studenomics to read the rest. If you enjoy reading this guest post then please consider subscribing to RSS Feed.

There are certain assumptions that have been made over the years in regards to a young persons financial situation while attending college. Today I will go as far as to say that these assumptions are nothing more than myths. As a result of this I will go one step further and dispel common college personal finance myths. I feel it’s about time someone showed the young people of today that certain assumptions are simply false and that there are more choices than ever.

Myth #1: You must pay for school with student loans.

Sure there are some programs that are extremely expensive (life sciences, engineering, and a few others) and student minimum wage isn’t exactly ideal, BUT this does not mean that your education you should be 100% student loan funded. You have the whole summer to work and save up your money to cover the costs of a college education. If that is not enough then you may still work a full time or a part time evening job while in college. If all of the above options are not feasible for you then try an internship in your field of study or even better enroll in a program that has paid work terms. The point that I’m trying to get across is that while some students may have to use a loan to fund their education, most students choose to accept this thinking as a fact instead of getting on their feet and working hard to earn money.

Myth #2:You will earn more money when you complete college, so there’s no point to save now.

That is like saying an out of shape person asking, I will be fit one day so what’s the point of working out today? The answer is simple, every little bit helps. Yes the money you save from a part time or summer job will not make you rich but it will definitely give you a head start over your friends that will be struggling to pay off their student debt. If you get used to saving a set amount of your income & budgeting at an early age then when you’re older you will have instilled in yourself strong fundamental habits. Also as you grow older your income will hopefully increase as will your savings. I have seen so many people my age complete a college program that substantially increases their income and guess what? their savings remained stagnant or non existent.

Let me give you a simple calculation to demonstrate how every dollar matters. A couple of years ago when I started my job I decided to automate my finances. A set amount of my paycheck went to retirement, savings, and into a regular checking account. One little thing that I did was I set up an emergency fund (since I had never read a personal blog in my life at that point I called it “secret money”) where I figured I would put $50 every paycheck (biweekly) into a government savings bond. Granted, the interest earned with savings bond is nothing spectacular but there is virtually no risk. Here are my savings without calculating the interest:

$50 x 26 pay checks= 1300$ x 4 years= $5,200

I know that $5,200 won’t buy you that dream car or the newest Giorgio Armani suit but I would rather have $5,200 than owe $5,200. This is also not my main savings account, it is simply an emergency/ “Secret money” account which you could use for whatever purpose you desire when you complete college. What will I use the money for? I already made a down payment on a new condo development so who knows? Maybe I will take a month long vacation across Europe before starting my career.

Myth #3: Retirement savings do not start until you complete college.

Actually you should begin saving for your retirement as soon as you start working or earning any form of an income. While I personally wouldn’t advise allocating a high amount of your yearly income into retirement savings, I still recommend that you put anywhere from $500-$1000 a year into retirement savings before you even begin your career. I set up a joint retirement savings account with my mom when I was 17 because I wanted to get a head start before I began making real money in my career. Once you begin your career then yes retirement savings will begin to get serious because you will have many different options and benefits, however, this is a topic that Lazy Man has covered extensively with his retirement plan series.

A common question that I receive from people in their 20s is, how are you suppose to motivate a 20 year old to worry about saving for a retirement that won’t happen for at least another 40 years? I actually have two answers to this question;

  • Look around you, every time you see a senior citizen well past the age of 60-65 still working (assuming they are not Warren Buffet) a job that they do not particular enjoy just to meet ends meet should make you strive to want to avoid a similar fate. Yes as mentioned above there will be people like Warren Buffet who will probably work forever but that’s because they truly live and breathe their job and it’s not a simple 9-5 for them. For the rest of us we will work a 9-5 for at least over 35 years of our lives, don’t you want to live comfortably in your golden years?
  • Look around you again. You notice all of those supposed “rich people” that are barely over 60 but spend most of their time traveling the world or spending time on activities that they truly enjoy? These people are not luckier than us, they are simply just people that planned for their retirement well in advance.

There you go. I have dispelled the most common myths circulated by young people while attending college. I am living proof that you do not need to be the smartest person to be financially independent. You just need to be the type of person that plans well in advance and goes against the curb in terms of not following common assumptions.

You tired of hearing advice from people that are always pessimistic? You looking for a common sense approach to personal finance issues that confuse many? If so then Studenomics.com is the place for you. Studenomics is one of the fastest growing personal finance blogs out there these days. Come check out the site and find out what all the buzz is about. Do not fear you will not be judged at Studenomics nor will you ever be treated with even the slightest bit of disrespect.

Check out Part 2 of Dispelling Common College PF Myths

[Editor’s Note: I’ve actually been thinking about adding a University of Phoenix (UoP) degree to my resume since I can complete it while I run my businesses from home. The UoP website featuresAll University of Phoenix campus locations and the college degree programs offered in each.]

Finance 101: Good Debt vs. Bad Debt

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I’m amazed by the number of people who seem to be against debt. Debt has become has a problem in America, but I think too many people clump the good with the bad. To the people that don’t like debt, would you take a million dollar loan at 1% interest? I would. I’d immediately put it in a few interest baring accounts that are FDIC insured (I say a few because FDIC insurance doesn’t cover a whole million). At today’s rates, which are historically pretty low, you can make a guaranteed 3% on that money. That means the debt naysayers would be missing out on 2% of a million dollars, $20,000 a year. I’m pretty Lazy, but for $20,000 I can manage to set up some bank accounts.

Good Debt

When you can make more money than you are paying, that’s an example of good debt. Some people call it leverage. Here are some other examples of good debt:

  • Student Loans – The idea here is that you choose to into a little debt now, so that you can make a lot more money through the rest of your life. That extra income, in theory, should be enough to pay back all that debt and then some. Just remember that if you initially got a bad rate you can refinance student loans and save a lot on interest.
  • Mortgage – This is an area of wide debate – it might even matter where you live. If you had a mortgage in the early 1990’s there’s a good chance that the debt allowed you to own a home that appreciated in value a whole lot. If you bought in some markets in the last couple of years, there’s a good chance you’ve seen no appreciation and if you sold today would have been worse off than if you rented. In many cases, a mortgage is tax deductable and that’s very nice benefit as well.
  • Work Necessities – Many people don’t consider a car loan good debt. However, if you need a car to get to your work, I argue that it’s good debt. For it to quality as good debt, you’d have to treat it as purely transportation between two points, not a status symbol. When an expense is necessary to protect your income stream, it may very fit into the good debt category

Bad Debt

Bad debt is debt that doesn’t have an obvious way helping your finances. There’s a lot of debt that falls into the category of bad debt, which is often where bad debt gets its name. Do you use a credit card to buy CDs and don’t pay it off every month? That’s a prime example of bad debt. Many companies will charge you interest of 20% or more. It’s not long until you are paying twice as much for that CD as you should. This does not benefit your finances?

If you go into debt to afford a vacation, that’s bad debt as well. You might feel more refreshed and ready to earn more money, but you need to get your finances in the positives first.

Three Debt Questions to Ask Yourself

I like to ask myself the following questions before considering taking on any kind of debt:
1. Am I going to pay interest on this purchase? With my credit card purchases, I pay them back, so the answer is usually no.
2. Does this purchase preserve or grow my current earning potential? If yes, then it has potential to be good debt. I say potential because it’s not worth going a million in debt to earn a couple of extra thousand dollars a year. It’s also not worth protecting a $20,000 a year job.
3. Am I buying this because I feel “I deserve it?” This is often a danger sign.

It’s not always easy and straight-forward, but understanding the difference can be important.