Saving

What is the Best Way to Save for College?

So you, or maybe your child is about to embark on one of the most fulfilling, enriching, and maturing (not to mention almost a prerequisite to nearly all lucrative jobs). Awesome! But oh wait….you have to pay. With the average cost of college somewhere in the ballpark of $33,000 for a four year degree from a public school, or $119,400 for a private college (savingforcollege.com), being educated seems like it’s almost not worth paying. WRONG. Education is always worth it, as long as you know how to go about it. Below we cover some of the best ways to save for college!

Saving for College

First things first, before worrying about saving for college, consider your options. A cheap alternative to enrolling in a four year university for all four years, is spending your first to at a technical or community college. The cost of tuition is nearly always less than half that of public school tuition. Be sure to check with an advisor or dean though before registering because not all credits transfer. The best way to ensure your courses will count toward your degree is to call both schools, and find some common ground. Many community colleges have a transfer program in place.

Next, go to your state education homepage, and see what sort of grants and scholarships are offered for you. The best way to make sure you qualify is to do your FAFSA, by going to www.fafsa.ed.gov. This will automatically tell you what sort of financial aid you qualify for. Next, check with your school’s financial aid office. Check early! Many schools have scholarships from the institution in place, and they’re highly competitive, so the earlier the better. After you have exhausted those methods, check the web. Are you very tall or under 5’0″ tall? There are scholarships for that. Some of the best web sites to check are fastweb.com and finaid.org. These will give you information on many scholarships compiled by their databases. Also, many people never apply for scholarships because of the dreaded essay you many times have to write. College is a lot of essay writing, and the worst part? You have to pay to write them! Scholarship essays may seem drab, but consider this. If you are applying for a $1000 scholarship, and you have write your essay in say , three hours. If you get the scholarship, you basically just got paid $333.33 an hour. Way better then that theater major will ever get you.

On a last note about scholarship sites, remember all this information is available free. Any site trying to charge you for it IS A SCAM. Once scholarships are done, the dreaded job. You can try a work study through the school, which may or may not directly go to your tuition. Check with financial aid for employment. Also, many jobs offer scholarships after an allotted amount of worked hours. Some examples are Chick Fil A, which offers a $1000 scholarship after 2 consecutive years of part time work, or roughly 2000 work hours.

How Much do I Need to Save for Retirement?

A 45 year old man working a typical 9-5 job might be thinking more intensely about saving for retirement than a 21 year old that just landed his first full time job with benefits. At the age of 21, he might start contributing 4% of his income to his 401k with a more aggressive market approach. His 45 year old neighbor is struggling tirelessly to contribute 10% of his pay with a much more conservative approach. They both share one common interest: saving for retirement.

Retirement

How much should an individual really save for retirement, and what is the ideal contribution to a company match plan? Many people have relied on and researched retirement planning calculators on the internet for years. The majority of these will calculate a percentage of income that one should be saving and deliver a figure that will support his/her lifestyle in 40 years. The calculator doesn’t take into consideration what everyone’s standard of living will amount to then. The sum of money that an individual should save for retirement doesn’t rely on income; it relies on money spent. A man could make $60,000 a year, but his current lifestyle requires an annual spending figure of $80,000. Another might bring home $80,000 a year, and his current lifestyle requires only $40,000. Should they both contribute the same amount to their 401k? Not likely.

Calculating a substantial amount of savings for retirement relies on evaluating an individual’s current spending and determining the standard of living he/she wishes to uphold at retirement. The retirement calculators that are based on income are not completely worthless. They provide a valuable resource for determining a figure of funds that will be saved after a number of years. Before utilizing these calculators, the individual must determine the ideal amount to save. This number will be derived from deciding how much to spend at retirement. Will they live lavishly, or will they live comfortably? Once a decision has been made on how much they want to spend in 40 years, then they can decide what to save. If the current budget does not allow for that level of spending, then they must discover other ways to save.

Here are a few frugal tips on saving money now for the future:

Stay healthy. One of the leading money guzzlers in retirement are health expenses. Prescription medications, knee replacements, high cholesterol, and cancer all come with a hefty bill. Regular physical activity and proactive health precautions may reduce these expenses.

Make friends with the neighbors. Retirees benefit from friends and family. Several people are willing to lend a helping hand to a senior citizen; a solid relationship will open this door.

Weatherproof the home. Energy costs are rising every year, and they might only increase in 20-40 years. Visit a local home improvement shop to find sealant for windows to prevent cold winter drafts. Ask about clearance items during the contrary weather season.

Being frugal will allow the individual to contribute much more to their company match plan for retirement.

The How To’s of Paying Off Student Loans

Congratulations! You graduated. And you, like countless of other graduates, have pretty outstanding student loans to pay back. Although there is no magic button, there are a few smart money tricks to help along the process.

Firstly, take advantage of the fact that many loans do not need to start being paid until 6 months after graduation. This alleviates some pressure, but not all of it. Depending on the type of loan, interest may or may not accrue during these months. There is never any harm in paying both interest and principal before you need to.

Secondly, you may qualify for a loan deferment of forbearance. Deferments and forbearances mean that you do not have to pay off any of the loan for a specified period of time. Interest may or may not accrue, depending on your loan company. You must apply and qualify for a deferment. Reasons for qualifications include economic hardship, unemployment, enrollment in school, teaching certain under privileged populations (such as Teach for America), working in health care professions, or certain volunteer services such as Americorps.

Thirdly, there are a few ways to receive debt forgiveness. Programs like the aforementioned Teach for America often forgive a percentage (albeit not a very large percentage) of student loans. Of course, it is important that they offer forgiveness as the salaries are not competitive enough for you to be able to pay off your student loans and live comfortably.

Fourthly, try to pay more than the minimum. The more you pay per month, the less you pay over all. A huge part of making this possible is living slightly below your means. Having an inexpensive rent, not eating out frequently, and limiting unnecessary spending are all factors that help you put a little more towards loans. Paying off loans in a shorter term period of time is like investing in your long term future. The more principal you pay off monthly, the less amount of interest you pay off in the long run.

Lastly, never be afraid to call your loan company to see what they can do for you. They are there to help–and to make sure that you do not default.

What are the Best Jobs for College Students?

Most people understand the importance of going to college; however, upon arrival many students will quickly discover that they are going to need to find a job to cover their living and entertainment expenses. Even the best jobs for college students do not pay a lot of money, but students do not need to make as much money as most of them believe. Even though a lot of these jobs do not pay a lot, many of them offer other benefits to their employees.

Getting a Job

Retail Stores

Many college students discover that working at a retail store, whether it be a grocery store or a clothing store, is relatively easy work. All that the management really expects is for them to have a positive attitude, show up on time and assist the customers. While these jobs typically do not offer commission or any kind of great pay, most of them offer some extra incentives. For example, many clothing stores will allow the employees to buy their stylish clothes for a substantial discount, so the employee will feel like they are making more money. This actually works out better, because the student will not have to pay income tax on the clothes.

Bars and Restaurants

Students who have an out-going personality and enjoy conversing with others should consider applying for a job at a restaurant or bar. Employees will work a little harder in these jobs than they would in a typical, minimum wage job, but the tips can be very good. It is typically easier to get a job serving at a restaurant than it is at a bar, since bartenders typically have more responsibilities, but servers can typically work their way up. Another nice thing about working for a bar or restaurant is that everyone enjoys being in this atmosphere anyway, and this will allow them to get paid to do so.

Sales

College students may also have an opportunity to work in certain sales job, with electronics being the most popular. Students will be able to work around and learn about the technology they love, but they will also have the ability to earn a commission on their sales. A lot of these stores will also give their employees a really good deal on electronics, such as cell phones. Receiving a cell phone and plan for a few dollars per month can make this job an excellent option.

Internet

Students who are really motivated and good at time management could start an online business. One of the most popular options is freelance writing, because it does not require any financial investment. If students want to invest a little money, they could buy some products and sell them online. The possibilities for working on the Internet are endless, but it takes the right personality to be successful.

These are just a few options for college students to choose from. The key thing for students to remember is that they need to determine what type of work sounds the most appealing. It is also important to note that some college towns may not have the same number of choices, so some students may have to take any job they can get.

E-Trade Review

E-Trade is highly recommended in today’s world of Internet and online stock trading. Many business publications have also given E-Trade high marks. Deciding which online brokerage firm to trust with investment money is a decision that should be researched, and chosen according to the broker’s reputation and services.

What E-Trade Offers Investors

Originally, E-Trade was an online stockbroker business that offered discount executed trades, and that was all. Today, it has become a brokerage firm that offers a full line of services to its clients who are looking to invest their money wisely. E-Trade handles the buying or selling of stocks for its customers, offers expert advice, and up-to-the-minute business news relating to stocks, and a varied list of features.

E-Trade For Beginning Traders

While well-suited to the active, experienced investor, E-Trade is also popular with beginning investors who might have only a thousand dollars to risk. The more active an investor becomes, the lower the commission rates. Becoming an investor is relatively simple. It requires an investor open an account, and fund it with at least $1,000. Once the money is credited to the investor’s account, trading is allowed.

How To Make A Trade

Buying and selling stocks, or making a trade, as it is commonly referred to, is in real-time. A first-time investor simply goes to their personal Accounts page, and follows the directions. Commission rates range from $6.99 to $9.99. An investor will be charged for each trade that is placed. Many times, the commission rate varies, depending on the balance of the trading account, and how often the investor places a trading order during a three-month period. The investor is responsible entirely for the buy and sell orders for stock in the investment account, as well as the choice to buy or sell bonds, futures, options or mutual funds

Products and Services of E-Trade

The services that E-Trade offers online are abundant, and comparable to much larger brokerage firms. E-Trade also offers convenient banking transactions, such as secure savings accounts, aside from trading accounts. The company also offers a wealth of references for investment research. Training seminars, and financial planning services are offered free of charge. E-Trade also offers offices in 16 states throughout the United States, if an in-person visit is preferred.

The Positives of E-Trade

While there is always up-sides and a down-sides to choosing a brokerage firm, one of the pros to using E-Trade is the easy access that common, everyday investors have to foreign markets, and the wide range of investment tools available. Also, E-Trade offers 24-hour telephone support for questions or concerns that can arise after markets close. E-Trade apps for smart phones are also reliable and easy to use.

The Negatives of E-Trade

There are also down sides to E-Trade, being that there is no live chat feature available on the website, and there are more features available to active traders than beginning traders. The fees and commissions are also higher the fewer trades an investor makes, encouraging the trader to risk additional money.

What is a 529 College Savings Plan?

A 529 plan is named after the Internal Revenue Code Section 529, and it is a savings plan created to allow individuals and families to set aside funds to be used for college expenses. The plan is operated by the State or an educational institution. The funds can be spent at any approved college regardless of where the fund was established. For example, a student living in State A with an established fund in that state or a state of one’s choosing, can attend college in State B and use the funds to cover the cost.

529 Plans and How They Work

Every state in the United States has a minimum of one 529 College Savings Plan available. It is up to each state to administer the fund and decide the rules and regulations of that fund. The rules and regulations governing the 529 Plan will differ from state to state. It is important to understand the benefits and features of each plan, and if two or more plans are available, to compare the plans to find the one that best fits the student’s and the plan owner’s needs.

The State financing authority has a program manager, usually an investment company or the State Treasurer’s office, to manage the funds. When a plan is opened by an individual, the funds paid in will be invested, much like a retirement account, usually in general obligation bonds, mutual funds and other investment options. The resulting funds are used to pay the specified percentage of tuition and mandatory fees at participating public and private colleges and universities.

The plan owner names a beneficiary, usually a family member, to benefit from the funds in the form of payments to attend a participating college. It is possible for an individual to set up an account for themselves, if they anticipate returning to college for any reason.

What are the Tax Benefits?

Under Federal Law, tax benefits are provided to tax participants who satisfy the basic tax requirements. Contributions are not an allowed Federal tax deduction on the Federal tax return, but the investment result is a deferred tax and payments to the student’s college are federally tax free. The tax-free treatment was made part of the Pension Protection Act of 2006.

Each state may offer their own tax breaks. The fund owner should research the state tax benefits for the plan and if the benefits do not fit the investor needs, the investor can choose from any 529 being offered throughout the country, as long as the application requirements are met.

Who Controls the Funds?

The fund owner always has full command of the funds. The named beneficiary cannot manipulate the funds, except for a few exceptions. The fund owner decides when financial withdrawals are made and for whatever purpose. The majority of 529 plans allow the fund owner to withdraw the funds for any purpose and during any time frame, but unqualified withdrawals will be subject to income taxation and a 10% penalty.

Are the Funds Flexible?

The fund owner has the ability to switch to different 529 plan option every year, if the plan permits such action, or the 529 may be transferred in total to a different program if no other transfer has occurred within the prior twelve months. There is no federal limit to the number of times changes can be made to a 529 plan if the beneficiary is replaced with a different family member, who qualifies, at the same time.

How to Use an Interest Calculator

An Interest Calculator is one that is used by individuals or firms within the financial sector to determine the amount of interest that will be accrued by a person or firm or business to whom they are extending credit in any form.

The Interest Calculator exists in a number of forms. It can be a document with a formula that is embedded within a spreadsheet document like what Microsoft Excel offers; an Interest Calculator can also exist as a web-page, as in the case where financial firms create web-pages that have the interest calculator embedded within them. This assists prospective clients to use these pages to find out what interest they may incur if they decide to use the financial services belonging to that provider.

The Interest Calculator can also be the actual device used to process this interest figure, and in this case, we are talking about a calculator as a mechanical device.

An Interest Calculator can also exist as a written formula, one that is simply worked out mathematically, on paper.

Interest Calculators typically cover two forms of interest: simple interest and compound interest.

In the case of a mechanical device, it can be programmed to work out the different types of interest, that is, simple and compound interest.

In the case of embedded formula based documents like Microsoft Excel spreadsheets or even web-pages with embedded formula, variations can be made for calculating both simple and compound interest as well.

The same variation can occur when it is calculated as a mathematical formula: you can have a mathematical formula for simple interest and a variation of the same for compound interest.

Simple interest involves calculations involving three basic variables: the principal, the time period and the rate of interest for that specific block of time.

Compound interest rates take into account several factors. These include the principle, the rate of interest over a specific period of time, and the time period involved; however, it also includes an important variation: the rate at which the interest amount paid changes over the varying principal over time.

Some compound interest calculations incorporate an allowance for fluctuations like inflation rates as well as bank rates, insurance premiums and things that affect the returns the financial institution gets from the transaction. Compound interest rates can also take into account penalties for early payments or even late payments, as determined by calculations stipulated by the financial institution.

Interest calculators will thus obviously vary in the situations they are used. Simple interest calculations best serve one off payments and are rarely used for the complicated and more long term financial arrangements. Simple interest rates cover calculations or transactions that are usually more informal in nature.

Compound interest rate calculations are more typical of formal business arrangements that are found in insurance firms, banks, credit card companies, mutual fund managers as well as saving scheme firms.

Banks vs. Credit Unions

Before starting a savings account, making investments, and making your own financial plan, you have one choice to make. Should you put your trust in a bank or a credit union? From the outside, the two financial institutions appear the same. What you do not know, however, could be the difference between becoming a member of a local bank or the local credit union.

Charles Funk, president and chief executive officer of MidWestOne Bank in Iowa City, Iowa delves into the subject.

“From the outside, banks and credit unions look basically the same,” Funk says of the two financial institutions. However, there is one distinct difference. Credit unions were created with the goal and mission to serve the under served. Taking a quick look at how credit unions have grown into a large brand shows how the original goal has been strayed from.

Banks have common stock and shareholders, whereas credit unions have members instead of shareholders. This also means that, unlike banks, credit unions do not pay income taxes. This allows them to use more of the money the collect for profit.

Banks and credit unions both offer similar services, from checking to savings accounts but how they operate on the inside is not as similar as the outside appears.

When it comes down to it, the choice between using a bank or credit union is up to the student. The thing to remember is to check all available options and find the one that works best for you.

What is a Target Date Fund?

There are a ton of investment vehicles on the market, most mutual fund companies now offer what is called a “Target Dated Fund”. Investors looking for a fund where they can invest for retirement and don’t have to worry about asset allocation will find target dated funds a perfect fit.
Target Date Funds
Target dated funds are mutual funds that are actively managed with a long term goal in mind. For example: The investor has a retirement date in mind, lets say 20 years from now. All they have to do is find a mutual fund with a target date that fits their criteria, make the investment into the fund and that’s it.

When Should You Use These Types Of Funds?

Investing in these types of mutual funds are for people who want to invest and forget. Lets use the example above: An investor has a retirement date which is 20 years from now. The risk profile for a person this far from retirement is still in the high risk category. This means the mutual fund manger will allocate the assets of this fund in investments that focus on higher capital returns, not capital preservation.

So, the fund will be invested more in stocks and less in bonds. The goal, since there is a long time frame for the investment, is to be aggressive, accumulate more capital. Then, as the fund matures the fund manager will make shifts in the asset allocation moving toward a more conservative mix of stocks and bonds.

Ultimately, as the fund closes in on the target date the asset allocation will be mostly in investments focused on capital preservation. So, for the investor who has a long term time frame for retirement and wants a passive investment, this can be the perfect investment vehicle.

Pros

Mutual funds are always diversified, this investment is no different. Target dated funds are generally comprised of a mixture of other funds. So, this means you have diversification within diversification, this lowers the investors downside risk.

The other advantage, which was already touched on, is an investment where the investor is pretty much hands off. The mutual fund manager is navigating the asset allocation in these funds. The investor is only choosing the target date, that’s all.

Cons

The downside of these target dated funds are fees. Since these funds are actively managed the fees can be much higher compared to other mutual funds. The other term that designates fees in a mutual fund is call “expense ratio”.

The last thing that can be a negative factor with these types of funds is the investments themselves. As mentioned, the fund manger chooses the blend of investments in the fund. Some target dated funds only invest within their own fund family. For example: A fidelity targeted fund will only invest in other fidelity mutual funds (this is only an example, fidelity may not do this,) in this case the investor can lose some of the safety factors that come with diversifying among a variety of mutual fund companies.

Overall, target dated funds can be the perfect investment vehicle for someone with a long term investment timeline who doesn’t want to worry about market fluctuations.