The perfect storm of millennial debt

A perfect storm of crushing student loan debt and a financial naiveté has led to an alarming situation among millennials, who face a long retirement with limited means to fund it. As of June 2016, the average debt owed by a new college graduate was $37,172, or over $300 per month for the next 10 years.  That means, even the most responsible graduate making regularly scheduled payments will be at least 32-years old before she or he is student debt free.  In addition to the student loan payment, a young adult most likely will have a car loan, a cell phone, utilities, food, gas, clothes and health insurance.  No wonder many millennials are living with their parents! According to a recent study by Junior Achievement and PwC US, 24 percent of millennials say they expect their loans will ultimately be forgiven. Even those that intend to repay their loans appear to be getting challenging advice. A recent New York Times piece, which noted that between 25 and 33 percent of student borrowers are late paying their very first loan bill, suggested that a reasonable level of debt is any amount that is the same or less than the student’s yearly salary.  That sounds like a statistic for underwriting mortgages. But, just as millennials have an unprecedented debt load, they also have plenty of innovative ways to control it. On-line budgeting tools make tracking payments simple. With automatic account transfers, it is nearly impossible to miss a bill payment. And not even debt-ridden millennials, who are projected to live more than 100 years, need to neglect their retirement accounts. Thanks to the magic of compound interest, a simple automatic transfer into a Roth IRA can yield impressive results, if they start early enough. That money grows and, because they’ve already paid taxes on it, they can withdraw without penalty when they turn 59 1/2, if they’ve owned the account at least… | Read More »

Top nine reasons to fund an HSA

For the past three years, I have gotten a notice from my healthcare provider that the policy I carry will no longer be available to me in the New Year.  Each year I find myself with a more expensive policy that provides me with less coverage.  But now, thanks to a savvy tip, I’ve figured out how to make my finances and healthcare work with each other.  How, you ask?  Three simple, sweet letters:  H S A. I am in a high-deductible health plan (HDHP).  My HDHP policy requires me to pay a deductible of $2,800.  As it turns out, as long as I have a minimum deductible of $1250 as a single person or a $2,500 minimum deductible for a family policy (which will be $1300 and $2600, respectively, for 2016), then I qualify for an HSA (Health Savings Account). An HSA allows a person or a family with a HDHP (high deductible health plan) to put aside tax free money that can be used to pay deductibles and other qualified healthcare expenses and won’t poof away into nothing if it isn’t used!  What a concept!  That just seems too good to be true! I have compiled a list of some important things to know regarding HSAs.  These are the top nine reasons my HSA is my new best friend: My HSA is tax deductible off of my gross income, which is awesome, and could even lower my tax bracket. My HSA resembles my Roth IRA since my principle grows tax free BUT, in addition, I get the fantastic benefit of receiving a current tax deduction. (NOTE: HSAs have contribution limits. For 2015, an individual may contribute up to $3,350; for a family, that amount is $6,650. People over 55 may add another $1,000 per year as a catch-up contribution). I can even have my HSA account managed by investment professionals to maximize its growth potential. If I don’t… | Read More »

The Richest Man in Babylon should be required reading

There’s something mystical and thrilling about books – the excitement of choosing which new book you will get to sample, the smell of the paper, the feel of the pages in your hand, the new characters that become almost friends. If you are a Nook reader, it remains just as stimulating – an awakening  where you can gather knowledge and be transported to another world, all through the power of words!  Books are my thing.  In general, I have approximately four books going at once: For the spirit Straight fiction (allowed only at the gym as motivation) Some sort of self-help To better my working financial knowledge. In all honesty, I have not been held particularly rapt by the last book category, not for lack of interest but because many of the books are simply difficult to digest.  For that exact reason, I am writing a series on financial books, to help you pick some easy-to-read and really informative financial literature.  If you have already read the book I suggest, then GREAT.  Maybe even read it again?!  If you have not read it, I hope you’ll give it a try. I believe that almost everyone age 14 or older will absorb a great deal out of The Richest Man In Babylon by George S. Clason ©1926.  In fact, I feel it should be required reading in both high schools and universities.  My copy has large print and only 158 pages.  It is a quick read, with easy to understand suggestions and practical applications.  Additionally, it is entertaining in an almost cinematic way. Overview It is a book of parables set in ancient Babylon.  It focuses on two best friends (Bansir and Kobbi) who have worked hard but have nothing to show for it.  They ask a third friend (Arkad), who has accumulated much wealth and is a happy man, how he did it.   Arkad wisely instructs his friends, “no man… | Read More »

Don’t make maximizing your 401(k) a DIY project

There is something exhilarating about a challenge; something satisfying about being presented with a daunting task and working hard to complete it!  A hard job done well is simply fulfilling.  Over the Labor Day weekend you would have found me in a 104 degree garage re-painting 10 closet doors.  It was sweaty work and I did my share of grumbling, but that made it even more sublime in its completion. However, there are some jobs that I just do not tackle.  With age, comes wisdom (so they say) and I am aware that I don’t have enough time in my week, month, or year to get even marginally good enough at some skilled tasks.  It is not worthwhile.  For instance, I don’t do my own taxes.  There are multiple rule changes and schedules and tax benefits and pitfalls that affect me.  It’s better for me to admit I need help than to get halfway through and belatedly realize I need decades to become anywhere close to proficient (or passionate) enough to really excel at tax prep. For that, I take advantage of Winch Financial’s excellent tax preparation services. I feel the same way with my 401(k) investment choices. Your 401(k) is the most important piece of wealth you have, second only to owning a home. An alarming majority of 401(k) investors do not pay much attention to this hefty portion of their wealth.  Many set up their account and close their eyes.  That is simply short sighted.  If you are not thinking about it, it is now time to begin!  Six of the biggest questions to consider are: How much are you funding your account? What is your employer’s match? Are you able to fund your 401(k) to the maximum – currently $18,000 in 2015 with an additional $6,000 catch-up contribution if you are 50 or older What investment options are open to you / what investments are you actually… | Read More »

How to pay your bills online, on time, every time

Traveling, whether for work or vacation, can pack a financial whallop.  The hassles of travel always seem to block my mind from my daily tasks and, sometimes, cause me to forget that I have bills due.  Yikes.  I don’t know about you, but I HATE late payment charges.   Late payments and parking tickets annoy me to no end — they are such a waste!  I travelled at length this summer.  Multiple times, I expressed how grateful I am for email reminders and online pay! Most utilities, credit cards, student loans, healthcare plans and mortgages have the option to pay online.  Some even have apps and/or accept PayPal.  Many people utilize these options and for good reason.  I conducted a very casual survey of when, why and how my co-workers paid their bills. These are the top reasons people pay online: Stamp, time and check cost savings. Payment can be made from anywhere there is a computer access (even your phone!) Payment is immediate and a confirmation code and/or confirmation email verifies payment has been made and the date of the payment. Ability to set up a due date reminder email – this has saved my hide multiple times! When asking ‘how’ payment is made online, some people mentioned they pay only from their bank’s online pay for the following reasons: There is only one login to remember. There is only one place to go for all bill payments. Payment and bank information are kept at only one location online. Banks have very stringent online security – it feels more secure. Banks will often send a check if electronic payment is not accepted – remember there is a 3-5 day lag time for check. Other people gave me some good reasons for paying at the creditor’s website: Ability to check all transaction activity and reward points immediately. Easier to track dates and amounts paid . Not wanting credit card information stored… | Read More »