A Financial Education Event
 

Credit Card Choices — Big Benefits With Right Choices

BGadmin

Southwest Airlines is running a credit card offer for qualifying applicants where they will get a companion pass for the rest of this year and all of 2018, plus 40,000 points. My daughter uses credit cards sparingly and her score is in the 800s (on a FICO scale up to 850). She decided to get the card and is thrilled to add her husband a companion to her recent round

trip purchase from Burbank to San Francisco for only $59. Pretty good deal for her. Since I already have a companion pass on a #SWA card, it wouldn’t be a good deal for me.

But not all deals are that good. How do you know which choice is best for your needs?

On my recent trip to #USAA, I learned a lot about the latest offerings in credit cards.

In fact, Yasmin Ghahremani, a writer with USAA, contributes the following information on how to navigate your first rewards card in three easy steps.

Credit cards that offer rewards like airline miles or a percent of cash back on everyday purchases can be a pretty great deal. But with so many different rewards credit cards available, choosing one that’s right for your lifestyle can feel overwhelming. Not only that, are you sure a rewards credit card is a smart financial move?

First off:  rewards credit cards aren’t for everyone. If you’ve never owned a credit card before or have a not-so-great credit score, you may not even qualify for a rewards card in the first place. And because interest rates for rewards cards tend to be higher than most credit cards, if you are the type to miss payments, make minimum payments only, or carry a hefty balance, your best bet is to look for a credit card with a low interest rate.

Once your cash flow and spending habits are more favorable, you can give rewards cards another look–otherwise, the interest you’ll pay on a carried balance will easily outstrip the value of any rewards you’ll receive. “Rewards cards are really best for transactors: those who pay off their balance every month,” says Mikel Van Cleve, Advice Director and CERTIFIED FINANCIAL PLANNER™ with USAA

That said, if your credit card hygiene is superb and you make a habit of paying off the balance in full each month, then you’re probably ready for your first rewards card!

1. First, consider the kind of rewards you’d like to earn. If you’re a jet-setter and love to take frequent vacations, travel rewards cards that can earn airline miles, waive luggage fees, grant access to posh airline lounges and more might be right up your alley.

Not the globe-trotting type? Then a cash-back rewards card might be more your style. These essentially give you a small percentage discount (anywhere from 1–5%) on the stuff you’re already buying with your credit card, like groceries, gas, online purchases and more.

Once you’ve identified the type of rewards you’d like to earn…

2. Match your spending habits to your overall rewards card management. Take a look at how much you actually spend in certain categories on an annual basis to pinpoint where you could earn the most rewards. If you’re single and eat out a lot, a card that offers extra cash back for grocery spending might not be the best fit.

Plus, not all rewards cards work the same way: some offer more complex variations, like extra cash-back percentage points for spending in certain categories, such as 3% at supermarkets and 1% on all other kinds of purchases.

Other kinds of rewards cards offer additional percentage points on a rotating calendar for certain types of purchases, with bonus categories changing every quarter. For example: you might earn 5% on groceries one quarter, 5% on gas the next quarter, 5% at restaurants for another quarter, etc.

Complex earning structures may ultimately earn you more, but only if you’re really familiar with your own spending habits and the amount of time you care to spend tracking expenses and managing rewards redemption. Depending on the card you choose, you’ll need to keep up with rotating categories that may require an opt-in action (like visiting a website or filling out a form) every quarter, or you miss out on the perks.

If you don’t want to hassle with that, consider choosing a card with a flat base earning rate. Many credit cards now offer 1.5% or even 2% on every purchase you make. For instance, if the card offers 1% cash back for every dollar you spend on the card and you’ve spent a total of $2,500, you can earn $25 cash back. Even better, you often have a choice on how to spend those rewards, usually via a check, a credit to your statement, or points good towards purchases with other retailers. (Beware the latter as it may encourage you to spend needlessly!) 

3. Examine the fine print of any offers you see. Does the card charge an annual fee that costs as much or more than you will likely earn back via rewards? If you feel pressured to spend more just to get enough rewards to justify the annual fee, that card might be causing you to spend more than you normally might.

Does the card place limits, or “cap” how many rewards you can earn in bonus categories? Some cards allow you to earn 3% on only the first $3,000 a year you spend on groceries, and after that rewards may diminish or disappear entirely. You’ll want to factor those considerations into your decision.

“Make sure you know how the cards you’re considering work, and figure out which one works best for your habits,” advises Van Cleve. “If you do that the rewards can really help you save some money and work toward other goals that you have.”

The Millennial Boomerang

BGadmin

“My kids will never come back to live with us after they are launched.”

“I don’t have worry about boomerang children, mine have great jobs.”

“Junior would never get into trouble and need me to bail him out, he’s a good boy.”

Have you ever made a declarative statement that you had to take back and eat, along with a big, fat slice of humble pie?  I have. In fact, I’ve eaten so many humble pies that I’ve put on five pounds just thinking about it! That’s why I’m approaching today’s blog very circumspectly.

“Failure to Launch” was not only a popular Matthew McConaughey movie (would someone puleeze give that man a shirt!). It’s also a syndrome in America among Boomer and Gen X parents and their Millennial babies. There are many reasons for this boomerang barrage. One primary factor has to do with the unemployment rate among 20 to 24 year olds, which was 15.4% last year according to the Bureau of Labor Statistics.

Furthermore, statistics from the Pew Research Center indicated that 13% of American parents with an adult child had a child move back into the family home. While 40% of recent college graduates still live at home.

Money matters are the number one reason why these kiddies come back home to mommy and daddy as well as the struggling economy, student loan debt, consumer debt and in some cases legal troubles. Another primary reason is that some parents just enjoy having their kids at home and don’t really see the need for them to move on and move out.

There is good news and bad news for families in this situation. A boomerang incidence is detrimental when the children have an entitlement mentality, don’t carry their own weight in the home, are not looking for work, and cause their parents to delay retirement to get them financially settled. No one wins in that situation.

The good news of the situation exists when this living arrangement is only temporary and involves a solid exit plan. In fact, it can be a great bonding time between generations, especially if there are grandchildren involved.

But one thing is certain:  boomerang babies introduce more stress into the household. If the old adage is true that “company and fish are alike, after three days they both begin to stink” then having adult children home for an months on end has the ability to raise your blood
pressure significantly.

But what to do? What to do?

Here is the Ellie Kay motto for a situation like this, just tell your adult children:  “My love for you is unconditional, by my money is not.”  Your “money” in this case includes your home, furnishings, food, car, cash, retirement fund, home equity, phones, insurance, and anything else in your monthly budget that is impacted by new peeps living with you!

Here are some guidelines to follow if you find yourself in this situation:

  • DTR – “Define The Relationship” by discussing the living arrangement and defining the expectations on both sides. Come to an agreement as to what is expected of one another and delineate the boundaries.
  • Develop An Exit Strategy First – A solid exit strategy will have them back on their own between 3 and 6 months. If they know when they will be expected say “sayonara”, then that gives them a deadline to work toward in becoming financially independent again. It also helps to eliminate resentment when the time doth draw nigh.
  • Do What – Do What? – This is your new song, in that you are going to ask that son or daughter to do their portion for the household, whether it is doing chores and paying rent, or contributing by buying groceries and paying the light bill. The more uncomfortable it becomes in the parent’s nest, the more motivation that birdie has to re-launch.
  • Define the Rules – Part of the exit strategy will include the establishment of a budget for the adult child. I like the mint app because multiple people can track the spending at the same time. If they are living in your home, then you have the right to oversee a budget that will help them live on their own again. The idea of this may seem to restrict their freedom but it’s all part of the diabolical plan to kick them back out of the nest again.
  • Do have them pay Rent – Once they are employed, then begin to increase the rent over the course of the next months until they are paying the same rent to you that they would be paying for a place of their own. If you want an idea of what rent is in your neighborhood, go to Rentometer to find out a fair rate. YES, it’s probably more than what your lovely room and board is worth—BUT THAT IS THE POINT! You want them to see how it’s not worth it to live with mumsey; it’s a better value elsewhere.
  • Do Unto Others –– If you want to be kind (and sneaky in a good way), then you can take half the rent they give you and put it in an account that you can then relinquish to them. This will help them pay the first and last month’s rent on a place of their own. But you don’t “owe” them this act of kindness, your money, after all, is conditional while your love is unconditional and don’t fall into the trap by defining your love with how much you pay their way.
  • Do Give Them Wisdom – In some cases, the best assistance you can give them (besides the establishment of a budget) is to get them to a financial counselor such as nfcc.org that will help them for free. The National Foundation for Credit Counseling can renegotiate loans, restructure debt and provide accountability outside of your direct influence. There’s nothing like a third party to be the bad guy when it comes to letting them know the real deal in the real world.
  • Don’t Bail them Out! – Just remember the idea of precedence: what you do once, you will have to do again for the same child or for another one of your children. Keep in mind your needs such as retirement, paying your bills, your credit scores and your financial future. We owe our children food, shelter and clothing for 18 years. We owe them unconditional love for a lifetime. But we don’t owe them a bailout when they overextend themselves or fail to plan responsibly.  

 

Before You Say “I Do” – Premarital Financial Counseling

BGadmin

“Bye, bye!”  I smiled and waved from the front porch, Bob by my side, “Nice to meet you!”

Speaking like a ventriloquist, I continued to wave at my son and his girlfriend,

“I give It less than one week” I told my husband, “two weeks tops.”

Bob smiled, giving his very poor ventriloquist rendition, “I don’t know, she was, ah, very conversational.”

“Yeah,” we turned to walk back in, “and her favorite topic was herself!”

We had just entertained one of our sons and a girl he brought home to meet us. In our family, we are predisposed to like the significant others that our children bring home because our kids have very good judgement. Contrary to popular belief, we aren’t sitting on “no” when it comes to these friendships that could blossom into something more.

One week later, we got a call from our son letting us know that he and the girl were not going to work out.

“Yeah,” our son reported, “I realized that the only thing we had in common was that we both thought she was pretty.”

The Kay whammy had struck again.

“What is the Kay whammy?” you ask.  It’s pretty simple, when our kids bring a special person home to meet our family, they either stay together for life and get married. Or, they break up within two weeks.

We are an intense family and we tend to drive away the faint of heart. But we are also a loving, loud and loquacious family and that attracts the brave hearts.

When it comes to a spouse, our kids look for certain qualities and when they get serious, we ask for a credit report.

I’m kidding.

Not really.

Knowing your future mate’s money habits is a significant part of deciding if they are a “forever” friend or not. Since “money matters” is cited as the #1 reason for divorce in America, it’s important to be on the same page regarding this topic. So far, all of our kids have opted for premarital counseling before the big day and this counseling should include the topic of money management.

Here’s a quick list of the financial topics that should be covered before you say I do.

8 Topics to Cover in Financial Premarital Counseling

Your Family of Origin’s Financial Situation

How did your parents manage money? What did they teach you about money? Chances are good you may manage your finances the way that your family did and this may be different from your significant other’s point of view. Did your parents save, believe in tithing, pay cash for everything or did they live paycheck to paycheck? Hashing out the differences, finding the similarities and developing a new plan for you and your spouse will be topics you cover under this heading.

Your Spend Plan

Do you currently have a budget? Go over both of your current budgets. If you don’t have one, then that is also a discussion point. Decide on what a new budget will look like for you as a couple when you are married. There’s a great app I use called Mint that can be accessed and updated by both parties at any time. This is especially good for military families who are apart but want to keep track of mutual spending.

 Holidays, Birthdays and Vacations

How do you spend money on vacations and holidays? Some families spend so much on Christmas, that it takes until the following May to pay off that debt. Others never take a family vacation. Our family had a low-key Christmas where each child got three modest gifts so the emphasis could stay on the Christ child. Then we went all out on their birthdays where the child was so celebrated that it became a highlight of the year for them. All these different approaches will impact your budget and your relationship.

 Born Spender or Saver?

What is your money personality? You could take the Money Harmony Quiz to see whether you are a born hoarder, spender, money monk, avoider or amasser.  Bob was a born spender, I was a born saver and we made it work nonetheless. But it took a lot of discussion and an action plan to learn to live in harmony with an opposite type of money personality.

 One Checkbook or Two?

Are you each going to keep your own checking account or are you going to combine them? Who will pay for which bill? What about savings accounts and credit cards? Will those be combined or remain separate? Now is a good time to download my free Sixty Minute Money Workout to help you learn how to discuss this topic and others within a time frame that minimizes conflict and maximizes the work you are doing in this area.

 Your Credit History or Debt

You and your significant other need to bring your credit reports to a premarital financial counseling session. Depending on what is there, it may be a wee bit uncomfortable. I married into 40K of consumer debt I didn’t know about and it had a huge impact on our lives together. Your mate may not count student loan debt as debt and you may find out there is an 80K loan that will impact your marriage. You can get a copy of your credit report, once a year, for free at Annual Credit Report and get one for each of the three reporting bureaus at this site. You can also get a copy of your credit score (different from a report) at Credit.com where they will also tell you ways to improve your score. Be prepared to enter your social security number to get this information. Talk about these debts and discuss a repayment plan.

Long Term Financial Priorities

My adult daughter says that life is about investing in experiences, not things. Her priority is travel over a newer car or designer clothes. Her husband’s priorities are slightly different because he’s a born saver. They learned how to discuss these diverse perspectives by doing a Sixty Minute Money Workout so they can get on the same page.  Your mate may want to buy a house as soon as possible and would forgo vacations to make that happen. You may not care that much about home ownership but really want to go home for the holidays. It’s important to discuss topics like housing, retirement, vacation and other long term goals before you get married. I like to say that you can have it all, but not at the same time. Bob and I chose to put our kids in private schools rather than drive new cars. Today, our kids are done with school and we drive the newer cars. We just have to choose the timing on our purchases.

 

Who Does the Math?

Someone is going to need to balance the checkbook, pay the bills and set up the budget. Yes, you should set up your spend plan together, you can even pay the bills together, but that’s usually the exception rather than the norm. One of you may be predisposed to balancing the books better than the other. One of you may actually enjoy paying the bills. In our family, I’m the financial expert and my husband flies jets, so you would think I balance the checkbook. But I also know that my husband needs to be aware of the bottom line because he’s the born spender, so he keeps the books and I review the statements. There needs to be a check and balance. One person should not have absolute control over the couple’s money. Sometimes, he who controls the money controls the house. So it’s important that both partners have access so that there’s no abuse of power.

Which of these topics have you already discussed with your significant other? Which topics still need to be explored? Set a day, time and topic to talk about money with your mate and don’t forget to get the free Sixty Minute Money Workout download.

 

Saving Every Day, the Kay Way

BGadmin

This week, I got a phone call from Jonathan, my fighter pilot son, sharing his latest bargain. He may have gotten his flying abilities from the World’s Greatest Fighter pilot, but he learned how to save from another family member, who will remain nameless. He talked about how he scored a new bedding set at Bed, Bath and Beyond by layering the savings. As he shared, his excitement gained momentum,

“Yeah, so the regular price for the bed set was $245, it was on clearance for $109, then the clearance was marked down another 50% for one day only, so it was $55. Then I used my 20% off coupon (found at Retail Me Not) and saved $21 more.” He came up for air, with the coup de gras,

“I only paid $34 for a bedding set valued at $245.”

He is my favorite son. *

After I complimented his money savings prowess, I excitedly told him about my recent discovery from our local County of Los Angeles Public Library in Quartz Hills. I found out that instead of paying $14.95 for Audible, (which is a good deal if you listen to a lot of audible books) you can get them for free at the library online. It was so easy. You just download the Overdrive app for free, register your library card and voila! I’ve already downloaded Dr. Who, The Underwater Menace and Jodi Picolt’s Small Great Things. Since it’s a digital download, I can listen to iton my phone in the car or on a plane–all for FREE. When I’m done, it’s automatically returned on the system.

Truth be told, I taught my kids from an early age how to save money. It’s in their DNA and it’s served them well as millennials in the cold, sometimes cruel world of adulting. The good news is that these skills can be learned, even if you weren’t taught from the womb how to get the best bargain.

For example, my daughter’s friend, Kristen, went to Downtown Disney with my daughter and I recently and we educated her at the Rainforest Cafe in a major way.

The first perk we received was when we called ahead to make a reservation (at 4:00 PM) and were told there were no reservations left until 9:00 PM. To which I replied,

“But I’m a Landry’s Select Club member.” I heard a quick intake of breath on the other side of the phone.

“Oh well, that’s different. Just come to the front of the line when you get here and they’ll be a 15-minute wait max for you.”

Sweet dreams are made of this.

We were happily seated upstairs at a table overlooking the two-story Atlas fountain and right in front of our own personal monkey. While we perused our menus, I explained how the Landry Select Club works.

“You only pay $25 to get the card and you earn a $25 credit for every $250 you spend at hundreds of participating restaurants, casinos and hotels across the county. It’s not a credit card, it’s just like a membership card. Restaurants like Bubba Gump, the Chart House, Saltgrass & McCormick and Schmick’s.”  I paused for a quick breath and continued,

“Plus, you get $25 credit your birthday month. There’s no renewal fees and you always get priority seating.” About that time, the Manager came over and asked us how it was going (another perk of being a member.) As soon as the manager left, my daughter added,

“Also, as soon as you register your new card online, you automatically get a $25 credit. So it pays for itself right away.”

Just then the storm began with a loud clap of thunder. The elephants at the end of the aisle started snorting loudly and our monkey friend kind of freaked out at the weather.

It was the end of our educational session. But not the end of our passion about saving money every day–the Kay way!

What are some of your day to day savings discoveries? Let me know!

 

*To be  clear all of Ellie Kay’s kids are her favorites.  She’s not a horrible mom who loves one child more than another. (Except when they buy her gifts for no reason, then they really are her favorite because gift giving is her love language, which really is a thing.)

Back to College – The Kay Way – part two

BGadmin

When people ask me how we are put our kids through college debt free, the answer is multi-fold.

First, we train our children from a young age that going to school, doing your homework and getting good grades is their primary “job.” By teaching them a good work ethic, we are laying the groundwork for scholarships and more.

Secondly, we send them to schools that we can afford or where they get the best scholarship offers to cover the most expenses.

Thirdly, we have saved a modest amount of college money to help them pay their room and board and partial tuition in some cases.

Lastly, but certainly not least, we require that they work part time in the summers or during the school year (through a work/study program or a regular job) in order to do their part in paying for college. By implementing these four disciplines, graduated debt free, with our most recent grad finishing up this past May. The older Kay kids had over ½ million in scholarships and and the last two garnered over a million dollars in scholarships.

Priorities
In any discussion of college costs, it’s important to keep priorities straight:
Parents need to leave yourself some fun money for retirement. How else can you afford that mechanical bull riding lesson and those parasailing flights (been there, done that, LOVE it)?
I really believe that you, as a parent, should try to avoid borrowing on your future in order to pay for your child’s future. Why would you want to take one of your greatest investments and leverage it for college expenses? Yet millions of parents make that devastating financial choice every year. I’m talking about avoiding any college funding plan that includes a home equity loan, a HELOC (home equity line of credit) or refinancing of an existing home mortgage. These options reduce the amount of equity in your home, increasing the risk of possible foreclosure and you incur costs in interest charges that may cost you more if the term on the new mortgage is greater than the remaining term on the existing mortgage.

The College Mantra
When I began a young adult, got married and began having kids (in that order) I was first exposed to the whole idea of “the college my child gets accepted to.” As a mom of many I frequently heard, “What college did they get accepted into?” The part of that question that amazes me is that the answer that is most impressive are also the most expensive (Columbia, Harvard, Stanford, Yale, etc). While an average of 40% of the students who attend these schools either get financial aid, grants or scholarships, they only average out to an assistance of $9600 per year. This leaves a boatload that the student and mom/dad owe for college. Most of this is usually in loans of some kind. So then the average student graduating from some of the most prestigious colleges have student loans upwards to $80,000 or more.
So why is the question: What college did they get accepted into?
The question should be: What college did they get accepted into that they can afford?
Why do you want to leverage your future (through HELOCS or loans) or leverage their future (through massive consumer debt) when it will take many years of earning power, for them to pay back those loans? One of the most common problems in young married Millennials is the burden of dual student loans in a marriage.

I’m doing what I can to help families minimize student loan debt so that both the parents and the graduates can have a better quality of life with more flexibility once they start those new careers. For more practical aspects of very specific ways you can pay for college. Please email assistant@elliekay.com and put “College Crunches” in the subject line. Our offices will send you a wonderful resource file that I wrote to help you fund a quality education for a fraction of the debt.

Ellie Kay

 

Back to College – The Kay Way – part one

BGadmin

Back To College

When Bethany was four years old, she came running in the house sobbing uncontrollably. I smoothed her blond curls and held her, “What’s wrong, Bunny?”
“I don’t want to leave you and go to college!” Her chubby arms held my neck tight.
“Um, well, Bunny, you don’t have to go to college any time soon!” I soothed, while rubbing her back.
She sat up straight, “I don’t?”
Wiping away her tears, she sniffed, “Good! Can I go back to Julie’s house and play again?”
I figured out later that all the drama was because Julie’s older brother was leaving for college and her friend’s family was sad to say goodbye. She thought she was going to have to leave us and it made her sad.
Fast forward the better part of two decades and she’s now a rising senior at Moody in Chicago, majoring in media communications. She’s not crying when she goes back to school, although we miss her. The good news is that she, along with all our other kids, are graduating debt-free! We don’t have any student loans and we didn’t have to refinance our house. Here are a few quick tips to pay for college. For more info, email assistant@elliekay.com and ask for the “College Crunch File.”

1. Make the Right Choice – Choose a school not because it’s the best, but because it’s the best value. Change the conversation from “I’ll go to the best college that I can get into” to “I will go to the school where I can get the best education possible for the least amount of student loan debt.” Our son, Daniel, chose the University of Texas (Arlington) over the scholarship he got to Syracuse and TCU because he would still have 60K in student loan debt after the scholarships ran out. He graduated with honors and a degree in journalism. He’s a working writer in Texas and doesn’t regret his college choice. In fact, when his department downsized and he needed to find another job, many in his section were overwhelmed because of their student loan debt. But his lack of college debt allowed him the freedom to find a job he really enjoys and he didn’t have to take the first job that came along.

2. Save Big on Books by Renting – The average student pays more than $600 for course materials – the largest expense after tuition and room and board.  You may want to look at renting textbooks through Follett’s Rent-A-Text program, students can cut costs by 50 percent or more. Or go to amazon to find used textbooks, making sure that you have an amazon prime account and can filter the options with the prime filter to get free shipping.

3. Make Scholarships a Part-Time Job – Millions of dollars of scholarship money go unclaimed every year. This is free money that parents or prospective students who are willing to do some detective work may find more quickly than they think. Have your student go to College Board or Fast Web  to find scholarships that might be a fit for your student.

4. Create a Budget, and Stick to It – As a parent of a college student, your love for your student is unconditional, but your money is conditional. That’s what we’ve always told our kids. To ensure students are making the most of their money, set a budget for spending and manage it by downloading Mint to help track spending. And determine which on-campus retailers accept financial aid to be certain you’re making the most of your college dollars.

Join us next week for part two of our Back To College series and let me hear your tips and idea to make college more affordable!

Ellie Kay
America’s Family Financial Expert

Heroes at Home Tours Europe

BGadmin

  1. As part of the “Heroes at Home Financial Event” 2017 world tour, we will visit military members and their families around the world, giving advice and practical tools on how to cope with the military lifestyle and advice on how to manage their money. Heroes at Home is visiting USAFE in Europe as well as AWAG in the next three weeks, thanks to our presenting sponsor, USAA and with help from educational partners such as Experian. You can find our schedule here. Our stops include Ramstein Air Base, Spangdahlem Air Base, Aviano Air Base, Royal Air Base Mildenhall , and Royal Air Base Alconbury

One of the ways we help military families save money overseas is to give them tips to “layer the savings.” Here are the steps to save big online:

1. The first step is to go to MySimon or bing which are shopping robots that will search the internet for your item to find the best deal possible. Then, there’s always amazon as well.

2. Once you’ve found the best deal, the second step is to go to a code site such asRetailMeNot or  coupon cabin  to find the codes you need to save even more. Sometimes these codes are for free shipping, gifts, or discounts.

3. The final step is to get a rebate for your shopping, by going to eBates or SlickDeals. On some of these sites, for example, if you have an account and get your friends to sign up under your account, you can earn $5 per referral. There are hundreds of participating online sites that will give you a rebate off of your purchases and you get a check at the end of each month.

CAUTION: To avoid spam: Be sure you deselect any “offers” you don’t want while signing up for a site. I also recommend that you use unroll.me to manage your subscriptions. They roll all of your emails into one larger email and you can easily deselect or unsubscribe. Bethany Bayless, our emcee has been unsubscribed from 700+ email lists in the last two years using this site. That’s a huge time savings!

Here’s an email from one of our audience members in Europe from one of our previous tours.

Dear Ellie Kay,

I would like to tell you how wonderful it was to have you speak at our meeting at Spangdahlem AB this past week. Your tips were great –I bought a bunch of clothes and with your tips and a $25 gift card I earned from mypoints.com I spent only $14!– and they really do work and are easy to do. Your military topics touched my heart and made me proud of what I am doing here for my husband as well as other military members . Thank you for telling our story to the world and for being an inspiration.Thank you so much!

Sincerely,Christina Aiken

 

Check out our schedule to see if we are coming to a base near you! Or, if you want to support our efforts, you can contribute to the financial education of our military members and their families at our Heroes at Home website.

Driving Cars for Free

BGadmin

In our Heroes at Home Financial Event Tour, one of the most popular segments deals with “how to drive a car for free.” The concept is fairly simple, but less than 10% of Americans actually follow the steps to experience debt free living when it comes to transportation. We love our military audiences because even though some military members are “ordered” to attend our show, by the time it is over, they are laughing, they’ve learned something and they realize how much fellow Americans loves them.

So how do you do it? Just follow three steps:

  1. Start with a Debt Free Car – This is usually going to be the car you just paid off. Or, it might be a vehicle a parent or someone else gave you (it might even have seen better days). In our lives, we were “given” one car and we gave away 8 cars. It might be that you agree to be a one-car family for 18 months instead of a two-car family. This is how the Kays did it to start with. If you don’t absolutely have to drive a car (you are a one car family, public transportation, driving someone else’s car, etc.), then you can go to step #2.
  1. Pay Yourself – The monthly payment for your car that you used to pay before it was paid off is a payment you will now pay to yourself instead of to the lienholder. So let’s say your car payment was $300. You will pay yourself $300 every month for 18 months. At the end of that time, you take the $5400 you have saved and then sell your existing vehicle for as much as you can get for it. You will get more money for your vehicle if you detail it, get everything running as well as possible (without a huge investment) and then sell it yourself. Go to KBB for 10 steps on how to sell your car yourself.  Let’s say you sell it for $8000. Now you have $13,400 to work with.
  1. Pay Cash for Your Next Car – Follow my steps from my previous blog on How to Buy A Car 101 – Even if you aren’t a USAA member (for an additional military discount), you can still follow the steps listed to pay the least price possible for your next vehicle. Make a special note: You cannot do this with a new car! It has to be a used car. The average new car depreciates $8000 in 8 seconds (when you drive it off the lot). So you have to buy a car that is slightly used (or real used until you trade up). The example in my blog shows how I traded up consistently until I was driving a modest Mercedes. (Is there such a thing as a modest Mercedes? I believe there is).
  1. Trade Up Until You’re Satisfied – After you’re in a new-to-you “paid for” car, then start with step number two all over again and start paying yourself. Let’s say you bought a car for $13,400 and you got into it low (as I showed you how to do in my previous blog), then in only 18 months a used car won’t depreciate that much (if you take care of it and try to keep low mileage on it) and you can sell it for close to what you paid for it. You sell it after 18 months for $13,000 and add the additional $5400 that you have saved by paying yourself every month. Now you have $18,400 going into step #3 and you can trade up your vehicle.

Does this work? It absolutely does. Not only do I do this in my own family, but I have children who do it as well. When my kids ask for my advice (sometimes it’s nice having a mom who is America’s Family Financial Expert ®), I advise them to not be wasting money on expensive car interest payments or crazy expensive leases. The difference is enough money saved over the course of five years to be able to put money down on a house instead of having to rent. It truly adds up!

Keep trading up until you are satisfied with your car and you can trade up into a car with a substantial manufacturer’s warranty (or negotiate that warranty). I do practice what I preach, and I did this to get my 2014 Mercedes, which is under mfg warranty until 2022. The only perceived downside is that my dream car is red and I thought that red cars get more speeding tickets than other colors. But good news! That’s a myth. Pedal to the metal!

What can you do today to drive your cars for free tomorrow? Let me hear from you!

Ellie Kay

Tap Into Financial Freedom in Seven Easy Steps

BGadmin

A Full house at Sheppard AFB. Photobombing my fellow speakers Ingrid Bruns from #USAA and Bethany Grace our high energy emcee!

Today, many families long for financial freedom and yet they are facing the same issues that Bob and I faced when we were first married—paying bills, stretching paychecks, and still trying to maintain a reasonable quality of life.  In our work with military members during the Heroes at Home Financial Event, we find that their problems are the same as most Americans. But there are answers for those who are willing to do something about it. Here are seven basic tips to help you beware and prepare:
1. Be Diligent: FICOS (Fair Isaac Credit Scores) – Now is the time to improve your FICO as these scores can determine your auto insurance premiums, whether you’ll get the promotion or the job (employers are checking FICOS these days), and whether you pay a security deposit for utilities. If you are a USAA member, you can link through your USAAaccount and get free credit monitoring service with Experian. If you downsize a home or a vehicle, you’re also going to need to have an excellent FICO to get the best APR rates. Rod Griffin educates our Heroes at Home audiences and among other advice, he gives very specific ways to improve your credit score in three easy steps:
· Pay your bills a day early (rather than a day late) by setting up payments online
· Pay $5 to $10 more than the minimum balance on your credit cards, which means you are paying down debt
· Proportionality: make sure that you don’t have more than 30% of the available credit charged on any one card (for example, $2000 charged on a card with a $6,000 limit).
2. Be Smart: Save Money– I get loads of emails every week from families who are cutting hundreds from their household budget by following simple savings tips such as using RetailMeNot or going to TravelZoo to save on travel and entertainment. From insurance to groceries, there are savvy ways to save at your fingertips. (See the money savings tips on this blog). Start to implement these savings and it will create good discipline that will prepare you for the inevitable highs and lows of the economy. Use the money you save to pay down debt and build short term savings. This prepares you and solidifies your financial picture.
3. Beware: Debt Consolidation Companies: With rumors of economic challenge comes an influx of those who want to “help” prepare you for the worse by consolidating your debt. However, many of the for profit debt counseling companies charge a hefty fee for their services, which is usually tacked onto your debt load. Instead of going through a for profit company, consider going to the nonprofit, National Consumer Credit Counseling Service. 
4. Be Aware: Refinancing to Pay Debt – As things begin to get tight, you might be tempted to get a HELOC (Home Equity Line of Credit) or refinance in order to pay your consumer debt. This isn’t a good idea if you’re using it to pay consumer debt and you haven’t learned the discipline of living on a budget. This kind of borrowing will only deteriorate the equity in your home and chances are really good you’ll be right back in that HUGE boat load of debt by this time next year. The better option is to cut costs, budget, and only use a HELOC for home improvements.
5. Be a “B” Word Person – If you don’t have the “B” word as part of your lifestyle, then yesterday was the day to start budgeting. Set one up with online budgeting tools, or a helpful app found at mint. Make sure your budget has “fun” figured into it and isn’t so restrictive that it is impossible to follow.
6. Be Careful: Recalculate Your GPS (Gross Personal Savings):  In this tip, you are building savings and paying down debt with the previous tips. But you are also recalculating your budget to accommodate the act of actually writing a check or transferring money from your checking to pay debt or to fund your savings account. Otherwise, all the money you save is just flying out the door.
7. Be A Planner With A Purpose – Whenever a “theory” is tested, it must stand up to a “proof” in order to be established as true. You can have all this good stuff on paper, but if you slap down the credit card to pay for a “40% off” killer Marc Jacobs suit, or buy a new boat during summer vacation–and you have consumer debt–then your plan is only a theory. For it to become REAL, you need to make it part of your daily life. This means your family starts to live with the plan and they don’t incur more debt. Your purpose is to live a life with more financial freedom in order to benefit your family and your kids future in the long run.
Ellie Kay
America’s Family Financial Expert (R)

Tips For Graduates Student Loan Debt

BGadmin

By now, the hats are tossed, tears are wiped away and the celebratory cake is gone for recent graduates, and now they are beginning their new lives in the real world. Like many of their predecessors in previous years, this year’s graduating class faces a wretched job market where there may be as many as five candidates for every job. Consequently, one of the most daunting tasks becomes the challenge of not falling behind on student loans. While challenging times can build moral fiber, you don’t want to build character by getting involved in the debt trap. Here are common questions I am frequently asked, as well as tips on how to keep student loan healthy:

Q. First of all, what are some of the consequences that graduates face by getting behind on student loans?

Ellie: As a mom of kids in college as well as a recent graduate, I know personally, how difficult the job market is and what a challenge these graduates face. First of all there will be interest charged for late payments as well as fees that will inflate the amount they owe—and chances are good that they owe too much as it is! If you default, the government could garnish your wages and withhold your tax refund. Not to mention a huge hit on your FICOscore, when you’re just starting out and trying to build a good score that will help get lower interest rates on a car or a house. It is also becoming more common for employers to check your credit history when considering which candidate to hire.

Q. But you say there is good news and that these dire consequences are avoidable, as least as far as federal student loans are concerned. The key is to understand your options and take action before you fall behind on payments. The first tip you list is to understand your grace period, when do students have to start paying back these loans and how do grace periods vary?

ELLIE: Borrowers typically have a few months after graduation before they are required to start repaying their federal student loans. For most federal student loans, the grace period is only six months. Most loans have up to ten years to repay. It’s important that you contact your loan provider and find out when the statements begin—especially if you haven’t received notification yet.

Q. What if the graduate has trouble finding work or they find an entry level job that typically doesn’t offer much in the way of compensation? Is there recourse for the amount they are required to pay for their loans?

ELLIE: That’s an excellent point and it brings us to our second tip, they need to find out whether they qualify for the income-based repayment program. Under this program, your loan payment could be reduced, based on the amount of discretionary income you have available. In most cases your loan payments won’t exceed 10% of your total income. After 25 years, anything you still owe on the loan will be forgiven.

Q. Is this income based repayment program an automatic enrollment or does the graduate need to apply for it?

ELLIE: You definitely need to apply for it by contacting the company that is servicing your student loan. If you’ve moved a time or two and your loan papers have not been forwarded to you and you are not sure who services your student loan, then you can go to the database of the National Student Loan Data System  National Student Loan Data System.

Q. Is there some paperwork you need to compile before you apply for the income based repayment program?

ELLIE: Yes, it’s important to have this paperwork on hand in order to streamline the process because you do want to get this filed as soon as possible—especially if you’re in danger of being late on loans and you have a genuine financial hardship due to your current income levels. You’ll need to authorize the IRS to provide last year’s tax return to the Department of Education. If you feel that your tax return doesn’t reflect your current situation, there’s a form you can use to show how your situation has changed. Get info on these forms and criteria, as well as links to major student loan servicers at the Project on Student Debt.

Q. We’ve looked at income based repayment, but what about those who need a quick, temporary fix? Maybe they have to take an unpaid internment at first or they may have a job that will become available in six months. Are there options such as deferment or forbearance available to this class of graduates?

ELLIE: If you are unemployed, still in school or experiencing economic hardship, you can apply to have payments on your federal student loans deferred for up to three years. If you have subsidized Stafford loans, which are provided to students who demonstrate financial need, the government will pay the interest on the loans during deferment. Interest on unsubsidized Stafford loans will accrue during deferment. If you don’t qualify for deferment, then you still might be eligible for forbearance, which allows you to put off payments for up to three years. It’s harder to qualify for deferment than it is for forbearance because in forbearance you will still have to pay interest that accrues.

Q. Does it take a long time for the paperwork to go through for these kinds of programs we’ve discussed: income based repayment, deferment and forbearance? Couldn’t a graduate find themselves in default by the time the paperwork is processed?

ELLIE: It’s important that you continue to make full payments until you’re notified otherwise. It takes longer for income based repayments and doesn’t take as long for deferment and forbearance because the latter two are temporary relief from loan payments. Whereas income based repayments could be longer term, depending upon how long you are in that job, making that salary. It’s important to look at forbearance and deferment as short term fixes and not long term—that’s why it’s really important to file for these right away, while you’re looking for a job. But if it looks like your payment problems will last longer than a few months, you definitely need to look at income-based repayment.

Q. Some graduates have huge student loans, in some cases, they have more than $30,000 in principal and interest. It is especially difficult for these grads to face this mountain of student loan debt. Can they extend the payment term in order to get through the first few years?

ELLIE: If you are a borrower who owes more than 30K , most lenders will allow you to extend the term beyond the standard 10 years, thus reducing monthly payments. The amount of interest you pay will increase, though, particularly if you extend payment over the maximum term of 25 years. And who wants to spend the next 30 years paying off a student loan? So I would only recommend this option as a last resort. Try to pay it within the standard 10 year term so that you can avoid thousands of more dollars in interest.

Q. Finally, we’ve discussed federal student loans, but a lot of viewers may hold private student loans that they have to repay. What are their options?

ELLIE: Well, the outlook is not as sunny for those who have private loans. They have fewer options. Private education lenders don’t participate in the income-based repayment program and they’re not required to allow you to defer payments, even if you’re out of work. If you’re having trouble with your private loans, read your loan agreement. It may require that the lender grant you forbearance under certain conditions. Even if your contract doesn’t include an economic hardship provision, your lender may be willing to provide relief. Some lenders have become more flexible in this post-great recession environment. You could ask for interest only payments or even to change the terms of the loan. For more information, go to Student Loan Borrower Assistance

Ellie Kay
America’s Family Financial Expert (R)
http://www.elliekay.com/

1 2