Top 5 Money Myths

Top 5 Money Myths

Top 5 Money Myths Exposed

Due to the coronavirus, high school and college commencements in general, are being held online. For the college Class of 2020, we have some financial advice to offer. Plus, we will expose the top 5 money myths that hopefully will get you started down the right path.

Based on personal experience, I’ve come across young graduates that are of the mind-set “let’s just kick back & be young for the time being and adulting will kick in when it’s ready.” As I look back now, this is not what I would recommend to 2020 grads or for any student.

My best recommendation to you is to get your finances in order as early as possible and don’t postpone it. The following are 5 money myths that really need to be debunked, once and for all.

Myth 1. To create a budget means you can only buy things you need, and not what you may want.

A proper budget is a means of allocating your money to cover your expenses and to place a certain amount in savings and retirement. A good budget to see this in action is the 50/30/20 budget. Many young adults find this one easier to understand and follow.

A part of these money myths is thinking that a budget is supposed to stop you from having any fun in life. Instead, think of it as one of the best ways to develop healthy financial habits. The key to this budget is to calculate your take home pay and work from there.

50% of that amount goes to cover rent or mortgage payment, utilities, transportation, insurance – essentially all of your basic needs. 30% is used for vacations, travel, clothing, other items that wouldn’t be covered by the 50% category.

The remaining 20% goes to set up an emergency fund, retirement, and debt retirement. By debt retirement, we mean all of those nasty credit cards that take forever to pay off. Payoff all short-term debt before starting to pay extra on your mortgage.

Top 5 money mythsThe 50/30/20 budget, if followed carefully, will help you to develop good financial habits and eventually, debt free. Watch the charge cards. They can be too tempting for some individuals. If you can’t payoff the card balance in full each month, stay away from them.

Healthy financial habits also include setting a consistent amount aside from each paycheck.

Myth 2. Why should I save for retirement at my young age?

Again, from experience, you’re never too young to start. The earlier that you begin to save for retirement, the more comfortable you will be in retirement. There are so many Americans who are ready for retirement and don’t have enough money saved. Some will be working until the day they die.

If you’re fortunate enough to be able to contribute to an employer sponsored 401(k) account or an IRA where the employer matches a certain percentage, take advantage of it. Put as much in that you can afford,  to start, and increase the amount as you go along.

It didn’t take the current coronavirus long to hurt our economy. Many, many jobs were lost, some permanently. Many individuals getting near retirement will have to postpone that date, or simply cancel it as long as they are able to work.

As an example, take a person at age 25 who saves $1,000 a month for ten years using an investment rate of 7%. When he gets to be 65, he will have about $1.4 million. If another person started at age 35 with the same parameters, he would end up with about $700,000.

The amount that you save each month is important, but it doesn’t have to be a large sum. The most important thing is compounding. The longer your money is invested, the more that you will have and this is why you need to start at an early age. This alone should debunk the money myths.

Myth 3. Using a credit card will just get me into heavy debt.

It’s true that it can for some individuals, and that’s why you need to be responsible and need to build and maintain a good credit history. Building a good credit score now will benefit you in the future. Most individuals are familiar with the FICO score, but there are many more. The two most lenders use are FICO and VantageScore.

Your credit score is a three-digit number assigned to you by the credit scoring programs. It tells lenders how much of a risk they are taking by advancing you credit. The credit scoring programs vary in what they consider to be the most important factors, so we’ll use FICO, who is the most familiar.

Top 5 money mythsThis data at FICO is grouped into five categories: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%) and credit mix (10%).

It’s important that you choose the right credit card when you begin. Some have annual fees and some have many other options. Read the fine print, review the fees and other charges, especially the interest rate.

To stay on track while you develop healthy financial habits, use the card for normal monthly expenses and pay it off before the end of the month. Don’t use the card for long term expenses such as financing something you bought on impulse.

Myth 4. Can I negotiate my salary for an entry-level job?

Recent graduates are of the opinion that they’re not experienced enough to be able to negotiate for more money when applying for a new job. Studies done show that only about 39% of new employees negotiated their salary. Another one of the money myths.

Just be careful and diplomatic when doing this. You don’t want to get passed over for the job for being too aggressive. Before considering negotiating, do some research. Find out what the industry’s pay on average is for your job.

Some of the factors used in doing this are experience, the job title, degrees required, industry, and especially the area of the country and/or city where you will work.

Myth 5. Will I ever be able to pay off all of my student loans?

You’re probably aware of the current student loan crisis with so many of them in default for non-payment. Plus, the very high tuition costs have increased the average loan amounts quite a bit. It’s no wonder that many new graduates are concerned that they’ll be paying on these loans when they reach retirement.

Even with the government postponing payments and even forgiving some others, student loan borrowers need to cut expenses as much as possible and apply that extra money to the student loans.

One well known financial counselor, who shall remain nameless, has suggested moving back in with your parents to cut more costs. Sorry parents, but sometimes this is necessary. Especially for the graduates that have postponements and no job prospects.

There’s a lot of scary things happening in the world today, and being back in your parent’s home can be tough. It’s okay to treat yourself once in a while if you’re able to, but stick with your budget. One of the money myths again.

Read More... Please comment

Financial Problems Caused by Coronavirus

Financial Problems Caused by Coronavirus

Financial Havoc Caused by the Coronavirus

It should come as no surprise that the coronavirus pandemic has left many individuals in dire financial straits. Many Americans who have lost their jobs, or other sources of income, have very little in savings as a backup.

A study was done by Simplywise.com, a technology company that provides free services to assist people in making sound Social Security decisions. They discovered that about 38% of individuals who lost their job, or had a drop in income due to Covid-19, had total savings that would barely last for a month.

Even more alarming, another 20% of individuals didn’t have enough in savings to last them for View full post…

Read More... Please comment

6 Other College Expenses

6 Other College Expenses

6 other college expenses (and opportunities) to consider when the financial aid letter arrives

(BPT) – The last year of high school is a whirl of activity, and it’s no different when it comes to the final leg of college selection. Once the acceptance notifications arrive, it will soon be time to sit down with a different stack of mail: financial aid letters and other college expenses to consider.

As you undoubtedly know, the cost of college is no small investment. In the 2017-18 academic year, the average tuition and fees for four-year public colleges is $25,620, while for private colleges, the costs are $33,520, and public two-year colleges cost $3,570, according to the College Board.

At the same time, the College Board reports that more than 70 percent of students receive grants to help pay for college. Hopefully, those financial letters contain some good news.

For most families, analyzing the letters is a process of uncovering the college that can offer the best education at the best value for your student. One way to get there is to parse the details of the letter itself so you understand the net cost of your student’s education. Still, it’s critical View full post…

Read More... Please comment

Student Loan Help – 4 Options

Student Loan Help – 4 Options

4 Options to Consider if You Need Student Loan Help

If you’re struggling to make the payments on your student loans, and you need student loan help, you’re not alone. When the 2017 college class graduated, the average amount of student loans each one carried was in excess of $39,000. College costs are increasing every year forcing students to borrow more. This only adds more to the total outstanding student loan debt which is just under $1.5 trillion dollars.

When you factor in that about 11% of these loans are in a delinquent status, taxpayers will be on the hook for a lot of money.

There are a few options available to you that can help get you back in control of your debt. Consider one or more of the following that can help to make your life a little View full post…

Read More... 4 Comments

Personal Loans – Are They Right for You?

Personal Loans – Are They Right for You?

What Are Personal Loans and When Are They a Good Idea?

A personal loan, however, can be for any of these things—or something completely different. Sometimes they’re a great idea, and sometimes not so much. Let’s dive in to what personal loans are, and how they are most commonly used.

 What are Personal Loans?

Unlike an auto loan or a mortgage, which are secured by the asset being financed, a personal loan is typically unsecured. Its approval is based mostly on the creditworthiness of the borrower.

Personal loans come with far more risk for the lender than View full post…

Read More... 10 Comments

Can You Spot a Student Loan Scam?

Can You Spot a Student Loan Scam?

5 Warning Signs That Might Indicate a Student Loan Scam

Many individuals have student loans to repay, and unfortunately, some are having trouble making those monthly payments. This is often due to other debt they are carrying like a car loan payment(s), a mortgage payment, and even credit card debt. This issue is ripe for a student loan scam.

In practically all publications that accept advertising, you’ll run across ads that say your problems can be over if you sign up with them. The ad will go on to say that they can help you to repay your student loans faster and at a lower cost – or they will get them completely forgiven.

These types of claims should be a red flag waving in your face and making you extremely cautious. There are some companies that may be legit, but there are also many that are scammers.

The following will help you to identify a student loan scam: View full post…

Read More... 12 Comments

Colleges Cheating on Student Loans

Colleges Cheating on Student Loans

Warning: Colleges Caught Cheating on Student Loans? Decide for Yourself

Just when you thought the student loan problem couldn’t get any worse – it did. A recent report issued by the GAO (Government Accountability Office), cited serious infractions by some colleges and universities regarding default rates, effectively cheating on student loans.

Some background and explanation will illustrate it better. In order for a college or university to be eligible for federal financial student aid, they must maintain a “cohort default rate” that is below a certain level. What that default rate means is the college’s share of their students who have student loans that went into default within three years of beginning repayment.

You can be sure that when a lot of money is involved, educated minds are at their highest level of creativity. Some colleges hired outside consultants who were motivated in helping the college and not the student. The consultants improperly placed many unfortunate borrowers in forbearance, even when there were better options for the student to pursue.

This action took View full post…

Read More... 6 Comments

Retirement Savings By Millennials

Retirement Savings By Millennials

Retirement Savings – Issues That Worry Millennials

Just when you thought that retirement savings meant putting away as much money as you needed for your lifestyle…now, making plans for unknown factors creeps in.
For the millennial generation, unfortunately, much is unknown. There are four primary concerns that we will list here and then elaborate later on:

1. Will social security and Medicare survive?
2. Will they have to take care of their elderly parents?
3. What will future health care costs be?
4. Are their retirement funds being managed properly?

Knowledgeable financial planners say View full post…

Read More... 8 Comments

Beware Co-signing a Student Loan

Beware Co-signing a Student Loan

Co-signing a Student Loan Could Ruin Your Retirement 

This is one aspect of parenting that has many opinions and heated discussions. Let’s say that your child or grandchild just finished high school and has been accepted by their favorite college. Unfortunately, some part of their borrowing will require co-signing a student loan with a private lender.

Like many other students who apply for financial aid, the federal government will approve loans directly to the student. This is done without as much as a credit check. But, many times the federal government approval doesn’t cover all of the costs and the student must apply to the private student loan lenders.

These loans do require a credit history check, and the young student usually View full post…

Read More... 8 Comments

Borrowing for College Today – What You Need to Know

Borrowing for College Today – What You Need to Know

What You Must Know About Borrowing for College

The College fall semester is right around the corner and if plans haven’t been finalized on how you plan to pay for it, don’t delay. Especially if borrowing for college is necessary. College costs continue to increase and the average cost for just one semester at a public college is around $7,000.00 and around $13,000.00 at a private school. These amounts are after grants and scholarships.

To cover the cost remaining, many families use a combination of current income, savings, and loans. It’s highly recommended to borrow money only as a last resort. Some colleges allow you to pay some part of the balance in installments, so it’s a good idea to ask.

There are still many families that have no other choice but to borrow to cover some part of the cost. A survey done by Sallie Mae indicated that almost 42% borrowed some amount of money the past year.

If borrowing for college is necessary, there View full post…

Read More... 10 Comments