As some may know, for this year everyone will be paying less on social security, 4.2% down from 6.2%. In the long run all this will do is make social security more likely to collapse and less likely for our generation to be able to rely on it. Therefore my plan is to increase my retirement savings by the amount I am "saving".
The IRS gives companies until Jan 31 to get their payroll computers set up and until March 31 to get the excess money back to you but that still gives everyone time to up their 2010 contributions.
1 Million Dollars
Wednesday, December 22, 2010
Saturday, November 6, 2010
Update on the millionaire goal
I was reading tax information and discovered that while my fiance is a full time student we are ineligible for the saver's credit. So no extra money for us, but oh well. This will not stop us from getting to a million dollars in our retirement accounts.
I did start a serving job as well as taking a tax class and we are talking about me going back to school so we have more money right now but that money does have places it needs to go. However, we are trying to put money aside for an EF as well as adding to the retirement accounts.
I did start a serving job as well as taking a tax class and we are talking about me going back to school so we have more money right now but that money does have places it needs to go. However, we are trying to put money aside for an EF as well as adding to the retirement accounts.
Sunday, October 3, 2010
Groupon
For those who do not know, groupon is a online deal website. They (along with others such as living social) post deals daily at a discount. The only problem is you have to buy the deal that day. It is great when you have self control and only buy when you have been looking for that deal but without self control can end up costing a lot. Right now buycostumes.com is doing the rounds on groupon, for $15 you get $30 worth of merchandise. It is in San Francisco today and was in Baltimore yesterday. You do not need to be in any of those cities to get it but it is funny that buycostumes.com is traveling the cities. Wonder were it will be tomorrow?
Monday, September 27, 2010
The Million Dollar Club
J. Money at BudgetsAreSexy has the coolest club around...and I'm joining!
In order for me to become a millionaire, I (and my fiance) pledge to do the following:
1. We won't be using 401k (yet)
2. Contribute $50 per month to his Roth IRA - $600/year
3. Sell stuff on eBay, craigslist and Amazon - $10/semester ($20/year)
4. Live Frugally - $1000/year (put into my EF)
After the wedding in May we pledge:
1. Contribute to the traditional IRA if it will make us able to use the saver's credit at the max of .5
2. Contribute $200 per month to our Roth IRAs depending on the saver's credit to determine where the money will be deposited
3. Sell stuff on eBay, craigslist and Amazon - $10/semester ($20/year)
4. Live Frugally - $1000/year (put into my EF)
I will be a millionaire in....I'm not sure!!
Part of that is because as we earn more money we save more, my DF has four more years of grad school, then a post-doc position and then a "real" job so there will be a lot of change over the next ten years. The second part is we plan to buy real estate as part of our retirement plan but that will depend of when we find the best deals. I am already looking for our second property.
In order for me to become a millionaire, I (and my fiance) pledge to do the following:
1. We won't be using 401k (yet)
2. Contribute $50 per month to his Roth IRA - $600/year
3. Sell stuff on eBay, craigslist and Amazon - $10/semester ($20/year)
4. Live Frugally - $1000/year (put into my EF)
After the wedding in May we pledge:
1. Contribute to the traditional IRA if it will make us able to use the saver's credit at the max of .5
2. Contribute $200 per month to our Roth IRAs depending on the saver's credit to determine where the money will be deposited
3. Sell stuff on eBay, craigslist and Amazon - $10/semester ($20/year)
4. Live Frugally - $1000/year (put into my EF)
I will be a millionaire in....I'm not sure!!
Part of that is because as we earn more money we save more, my DF has four more years of grad school, then a post-doc position and then a "real" job so there will be a lot of change over the next ten years. The second part is we plan to buy real estate as part of our retirement plan but that will depend of when we find the best deals. I am already looking for our second property.
We have updated our plan, come check out the new plan!!!!
http://frugalstudents.blogspot.com/2014/02/updated-millionaire-plan-february-2014.htmlWednesday, July 14, 2010
Free amazon shipping
Amazon is giving away one year of prime membership free to student but you have to have an edu account. Most schools give them to their students but most students do not use them, check if you think you do not have it.
Thanks to moneysavingmom for this information.
http://moneysavingmom.com/2010/07/amazon-com-free-one-year-amazon-prime-membership-for-college-students.html
Thanks to moneysavingmom for this information.
http://moneysavingmom.com/2010/07/amazon-com-free-one-year-amazon-prime-membership-for-college-students.html
Wednesday, June 30, 2010
Decisions
When it comes to money, once you have a bit, there are so many decisions to make. For example, should I pay extra on my student loans or put more towards retirement? Should I have a 3 month emergency fund or a 6 month emergency fund (EF)? If I put more of my savings in my emergency fund, what do I cut? The problem is we cannot do everything we want, spending or savings wise.
For students the choices can be do I work or take student loans? Or should I take out the minimum I need or have some breathing room? All of these choices will affect our futures but we don't know which is the best choice. So how to choose?
Personally I think it is ok to take the max amount of subsidized student loans to give yourself an EF as long as you keep that money as EF and not an excuse to spend more. Also, I would assume that a student would repay the extra amount they took within the first 6 month after graduation to avoid having a large month expense. Also check what fees you pay to get the loan (discover is 0% but direct loans can have up to a 1.5% fee).
In regard to SL vs retirement it depends, if you have having trouble with cash flow maybe paying some the student loans off may be better for you or if you have private student loans (because they are variable) it may be a good idea to pay them off before the rate goes up. For my DF and I, we will be paying off my small loan while he is graduate school while saying 14% of our income to retirement. Because he started saving late, that amount is the least amount we feel comfortable saving. This will allow us some breathing room when he is a post doctoral fellow (which does not pay much).
To determine how much of an EF you need, I would look at your expenses, how easy it would be to get a job to cover those expenses and how stable your job is. As a graduate student my DF's job is extremely stable for the next three years so I am fine with a three month EF but once he becomes a post doctoral fellow it will be moved up to six months because a post doctoral fellow is not as stable.
But all of these are our choices and everyone makes their own, as it should be. Just make sure you know why you making your decisions and why they are right for you.
For students the choices can be do I work or take student loans? Or should I take out the minimum I need or have some breathing room? All of these choices will affect our futures but we don't know which is the best choice. So how to choose?
Personally I think it is ok to take the max amount of subsidized student loans to give yourself an EF as long as you keep that money as EF and not an excuse to spend more. Also, I would assume that a student would repay the extra amount they took within the first 6 month after graduation to avoid having a large month expense. Also check what fees you pay to get the loan (discover is 0% but direct loans can have up to a 1.5% fee).
In regard to SL vs retirement it depends, if you have having trouble with cash flow maybe paying some the student loans off may be better for you or if you have private student loans (because they are variable) it may be a good idea to pay them off before the rate goes up. For my DF and I, we will be paying off my small loan while he is graduate school while saying 14% of our income to retirement. Because he started saving late, that amount is the least amount we feel comfortable saving. This will allow us some breathing room when he is a post doctoral fellow (which does not pay much).
To determine how much of an EF you need, I would look at your expenses, how easy it would be to get a job to cover those expenses and how stable your job is. As a graduate student my DF's job is extremely stable for the next three years so I am fine with a three month EF but once he becomes a post doctoral fellow it will be moved up to six months because a post doctoral fellow is not as stable.
But all of these are our choices and everyone makes their own, as it should be. Just make sure you know why you making your decisions and why they are right for you.
Friday, June 4, 2010
Where to Save?
Now, you have done some surveys or gotten some cash back from shopping or been frugal for a few weeks, now where do you put that extra money you now have? Well you definitely don't want leave it in your checking, you will spend it. You could move it your saving at your bank or credit union but the interest is pennies so where should you put it?
Well if you opened a upromise account, also open a Sallie Mae account and set up $25 automated transfers from your checking to Sallie Mae and you will get an additional 10% on your cash back from upromise, that it transfer from upromise to Sallie Mae every time you have $10 or more in your upromise account. This additional 10% will be deposited (they say) in February. Keep in mind that this is a new venture for Sallie Mae and expect problems. For example, they were supposed to withdraw $25 from my checking and deposited it Sallie Mae and they withdrew the $25 from both accounts. It got fixed, but it took awhile and I do not know if they would have fixed it if I had not noticed. But checking the account for mistakes takes me a few minutes every week and I do it with all my accounts so that is not a problem for me. My fiance, on the other hand does not want to deal with the issues so he does not have a Sallie Mae account. At this time the interest at Sallie Mae is 1.40%.
Otherwise save up $250 and open a ING account using a link for someone who already has the account. If you do so, you get an additional $25 (if you leave it open with the $250 for three months) and the person whose link you used get $10. At this time the interest at ING is 1.10%. Looking at just rates, if you were going to pick on high yield savings, I would pick Sallie Mae but the additional $25 makes up for a lot. If you do not know anyone who has a ING account, please leave a message here with your email and I will send you a link.
As you start putting the money in these account, they will begin to snowball and you begin to have more money for less effort.
Well if you opened a upromise account, also open a Sallie Mae account and set up $25 automated transfers from your checking to Sallie Mae and you will get an additional 10% on your cash back from upromise, that it transfer from upromise to Sallie Mae every time you have $10 or more in your upromise account. This additional 10% will be deposited (they say) in February. Keep in mind that this is a new venture for Sallie Mae and expect problems. For example, they were supposed to withdraw $25 from my checking and deposited it Sallie Mae and they withdrew the $25 from both accounts. It got fixed, but it took awhile and I do not know if they would have fixed it if I had not noticed. But checking the account for mistakes takes me a few minutes every week and I do it with all my accounts so that is not a problem for me. My fiance, on the other hand does not want to deal with the issues so he does not have a Sallie Mae account. At this time the interest at Sallie Mae is 1.40%.
Otherwise save up $250 and open a ING account using a link for someone who already has the account. If you do so, you get an additional $25 (if you leave it open with the $250 for three months) and the person whose link you used get $10. At this time the interest at ING is 1.10%. Looking at just rates, if you were going to pick on high yield savings, I would pick Sallie Mae but the additional $25 makes up for a lot. If you do not know anyone who has a ING account, please leave a message here with your email and I will send you a link.
As you start putting the money in these account, they will begin to snowball and you begin to have more money for less effort.
Saturday, May 29, 2010
Memorial Day
Happy memorial day for those in the USA. Many people have barbecues/parties and trips over memorial day but is there a way to do these things cheaper? I think yes.
For barbecues you can have a potluck instead of paying for everything or you could buy the meat in advance and take advantage of the sales or find a small meat market and make a deal if you buy in bulk. Many small meat stores will discount if you are buying in bulk. The same goes for some liqueur stores.
For trips, fuel up way before memorial day, even put some extra in a gas can if you have one. Go to the grocery store and pack drink and snacks as well as lunch for at least the first day and stay at places that include breakfast. If you do this, you will buy four meals instead of seven plus you won't have to buy drinks on the road.
Have fun.
For barbecues you can have a potluck instead of paying for everything or you could buy the meat in advance and take advantage of the sales or find a small meat market and make a deal if you buy in bulk. Many small meat stores will discount if you are buying in bulk. The same goes for some liqueur stores.
For trips, fuel up way before memorial day, even put some extra in a gas can if you have one. Go to the grocery store and pack drink and snacks as well as lunch for at least the first day and stay at places that include breakfast. If you do this, you will buy four meals instead of seven plus you won't have to buy drinks on the road.
Have fun.
Wednesday, May 19, 2010
Frugal Fun Part 1
Students especially if they work don't have a lot of time and if you work more to get more money often your financial aid is cut so if you can't work more how do you get more money?
Well, you could take a page from high school and babysit or house sit, that money would not go on your FAFSA. However, you are suppose to claim that on your taxes and therefore on your FAFSA (frugalstudents does not say to cheat on your taxes, mostly cause the IRS is scary!). So what can you do?
Most students have very little time and want to have fun so many of the tricks on frugal blogs don't work, either you live at home and they are not applicable or you live in the dorm and you are not allowed to try the tricks (stockpiling being one trick) or again they are not applicable. So again, what can you do?
Well, you could buy gift cards for places you know you will spend, like movie theaters for great movies like Iron Man 2 (I am going to see it this weekend) and then go see the movie during the matinee. Lets do the math, shall we? Say you and your SO (boyfriend/girlfriend) want to go see Iron Man and your are in buffalo, NY. You could go buy the tickets for Friday night at 10.00 a person. So just to see the move you have spent $20 not even counting popcorn, candy or a drink.
So how could you do this and pay less? Well first you can go to plastic jungle and buy a gift card for Regal theaters for 10% off, then you go to the theater Saturday afternoon instead and only pay $16 for the two ticket ($8/each) but since you got the gift card for 10% off, it is only $14.40. You can use the rest of that money ($5.60) to buy popcorn.
Same fun date and by being frugal (not cheap) you get even more than if you were not and honestly all it takes is 5 minutes and a little thinking ahead.
Well, you could take a page from high school and babysit or house sit, that money would not go on your FAFSA. However, you are suppose to claim that on your taxes and therefore on your FAFSA (frugalstudents does not say to cheat on your taxes, mostly cause the IRS is scary!). So what can you do?
Most students have very little time and want to have fun so many of the tricks on frugal blogs don't work, either you live at home and they are not applicable or you live in the dorm and you are not allowed to try the tricks (stockpiling being one trick) or again they are not applicable. So again, what can you do?
Well, you could buy gift cards for places you know you will spend, like movie theaters for great movies like Iron Man 2 (I am going to see it this weekend) and then go see the movie during the matinee. Lets do the math, shall we? Say you and your SO (boyfriend/girlfriend) want to go see Iron Man and your are in buffalo, NY. You could go buy the tickets for Friday night at 10.00 a person. So just to see the move you have spent $20 not even counting popcorn, candy or a drink.
So how could you do this and pay less? Well first you can go to plastic jungle and buy a gift card for Regal theaters for 10% off, then you go to the theater Saturday afternoon instead and only pay $16 for the two ticket ($8/each) but since you got the gift card for 10% off, it is only $14.40. You can use the rest of that money ($5.60) to buy popcorn.
Same fun date and by being frugal (not cheap) you get even more than if you were not and honestly all it takes is 5 minutes and a little thinking ahead.
Friday, May 14, 2010
Emergency Funds
Everyone should have an emergency fund (EF) but most financial advice is for you to save three to six months of your salary, how does that work with students? Honestly it does not work. For a young student who is living on loans and side income the best thing is to have a small EF and ways to access money. For example, if you are receive subsidized loans for school but have $5000 each semester of unsubsidized loans available to you, figure out how long it will be till you would able to access them and what bills you would need to pay in that time.
When I was an undergraduate I had a small subsidized loan as well work study, a waitress job and access to another $3000 each semester from unsubsidized loans. My school also would loan (in a emergency) an additional $500 to be repaid in a month, however it would take about two or three weeks to get the money. So my emergency plan was put what ever problem on the credit card (fixed rate of 9.9% from my credit union), apply for the $500 no interest loan from school and then apply for the unsubsidized loan of 6.8% (it took about two months because the loans went to the school and then the school cashed the check out to me).
This allowed me to know that if I lost my waitress job I had a plan which is in sometimes better than just cash. I did however put away as much as I could to use in case of a smaller emergency, such as car repair, and rarely had to use it.
Next article will go into where to put that extra cash you can manage to squirrel away.
When I was an undergraduate I had a small subsidized loan as well work study, a waitress job and access to another $3000 each semester from unsubsidized loans. My school also would loan (in a emergency) an additional $500 to be repaid in a month, however it would take about two or three weeks to get the money. So my emergency plan was put what ever problem on the credit card (fixed rate of 9.9% from my credit union), apply for the $500 no interest loan from school and then apply for the unsubsidized loan of 6.8% (it took about two months because the loans went to the school and then the school cashed the check out to me).
This allowed me to know that if I lost my waitress job I had a plan which is in sometimes better than just cash. I did however put away as much as I could to use in case of a smaller emergency, such as car repair, and rarely had to use it.
Next article will go into where to put that extra cash you can manage to squirrel away.
Monday, May 3, 2010
Summer is Coming!!!!!!
Students are gearing up for finals and then either a break or graduation! Congrats to the grads and have fun to those who will be on break!
Grads should be aware that their student loans start repayment in about 6 month even if the company does not contact you.
But enough of the depressing stuff, it is almost summer. Summer is one of the best times for frugal fun. Grilling (if you have a grill) with friends in the backyard, picnics with you SO, farmer markets and hiking are all fun things to do over the summer (and they don't cost very much money).
Also fruits and vegetables are starting to be on sale. I got a bag of red potatoes (5lbs) for 2.99, two artichokes for $1.00 and two corns for .25 each. I made mash potatoes and had a great dinner last night. For dinner last night, since I only used a pound of potatoes, I spent $2.50, which includes the amount of milk, butter and spices used to cook with. So dinner, which I still have left over potatoes cost me $1.25/person. Cheap! And it was healthy.
Also I have been getting the ground ready for its first garden. I have a basil plant that I will need to move to a bigger planter and I bought a few raspberry and blackberry plants online that should be coming soon (there was a sale, that made the online price much lower than home depot), so that is taking up time and giving me some exercise. But I am enjoying it and next year we will have lots of fruit.
My advice for the summer, find free or cheap things to do outside and enjoy yourself. So get on your tennis shoes and get out there. Have fun and eat lots of fruits and vegetables, your wallet and your body will thank you.
Grads should be aware that their student loans start repayment in about 6 month even if the company does not contact you.
But enough of the depressing stuff, it is almost summer. Summer is one of the best times for frugal fun. Grilling (if you have a grill) with friends in the backyard, picnics with you SO, farmer markets and hiking are all fun things to do over the summer (and they don't cost very much money).
Also fruits and vegetables are starting to be on sale. I got a bag of red potatoes (5lbs) for 2.99, two artichokes for $1.00 and two corns for .25 each. I made mash potatoes and had a great dinner last night. For dinner last night, since I only used a pound of potatoes, I spent $2.50, which includes the amount of milk, butter and spices used to cook with. So dinner, which I still have left over potatoes cost me $1.25/person. Cheap! And it was healthy.
Also I have been getting the ground ready for its first garden. I have a basil plant that I will need to move to a bigger planter and I bought a few raspberry and blackberry plants online that should be coming soon (there was a sale, that made the online price much lower than home depot), so that is taking up time and giving me some exercise. But I am enjoying it and next year we will have lots of fruit.
My advice for the summer, find free or cheap things to do outside and enjoy yourself. So get on your tennis shoes and get out there. Have fun and eat lots of fruits and vegetables, your wallet and your body will thank you.
Friday, April 23, 2010
5 minute mom UBP after party
This year was my first year participating in the UBP from 5 minute for mom and I learned a lot (and ticked off google, they apparently do not like blog parties).
I was able to read of ton of financial blogs that I would not have found and now have many more people checking out my blog as well. I will be participating in the blog party next year, I hope. I now check a few more blogs on a regular basis, for example: 5 minutes for mom because of how they create a blogger community; frugally fabulous mom for all of her deal especially for children (I am a planner and we plan to have children soon after the wedding which is in 2011); and of course A Maui blog for all the information about Maui to help me plan my honeymoon.
This blog party has been so great for me, I have gotten great new contacts, a new information for both my present and future in all aspects of my life, so thanks to the great bloggers at 5 minutes for mom!
I was able to read of ton of financial blogs that I would not have found and now have many more people checking out my blog as well. I will be participating in the blog party next year, I hope. I now check a few more blogs on a regular basis, for example: 5 minutes for mom because of how they create a blogger community; frugally fabulous mom for all of her deal especially for children (I am a planner and we plan to have children soon after the wedding which is in 2011); and of course A Maui blog for all the information about Maui to help me plan my honeymoon.
This blog party has been so great for me, I have gotten great new contacts, a new information for both my present and future in all aspects of my life, so thanks to the great bloggers at 5 minutes for mom!
Thursday, April 15, 2010
Investing/ Retirement Saving Part 3
Taxable accounts are the third type of account you can use to save for retirement. Taxable accounts are basically everything not mentioned in that two articles. Bonds, stock, saving accounts, all of it can be a taxable account.
Most often it is not recommended to save in a taxable account unless you are maxing out your other options or for non-retirement saving like an emergency fund, down payment for a house, things like that. However those are all goals that are short term which means you should be saving in savings account or CD account. When would you start putting money in bond or stocks/mutual funds in taxable accounts?
Never hold bond (except government bonds) in a taxable account, only stocks/mutual funds. Government bonds have tax savings all their own so have some of those outside your tax deferred or tax advantage account is fine but if you hold a mutual fund or stock for more than a year, taxes when you sell it are lower than any other type of income tax. For example, the max right now you can pay on a stock profit (if you have held it for a year) is 15% vs 30% or so. However corporate bonds do not get that discount are taxed just like everything else so but corporate bonds in the other two types of accounts and put mutual fund/stock in a taxable account.
To do this you can go to the same companies you used for your IRA, T Rowe Price, Vanguard, or Fidelity and they can help you set an account up. If you want to buy individual stocks, not mutual funds you can still do it there but there are better options but you don't want to start there yet.
So basically when you are earning enough to max out all the tax deferred and tax advantage accounts you have start dropping a little bit in taxable accounts. When you retire it will allow you to live better on less taxes and it also gives you another emergency fund.
Most often it is not recommended to save in a taxable account unless you are maxing out your other options or for non-retirement saving like an emergency fund, down payment for a house, things like that. However those are all goals that are short term which means you should be saving in savings account or CD account. When would you start putting money in bond or stocks/mutual funds in taxable accounts?
Never hold bond (except government bonds) in a taxable account, only stocks/mutual funds. Government bonds have tax savings all their own so have some of those outside your tax deferred or tax advantage account is fine but if you hold a mutual fund or stock for more than a year, taxes when you sell it are lower than any other type of income tax. For example, the max right now you can pay on a stock profit (if you have held it for a year) is 15% vs 30% or so. However corporate bonds do not get that discount are taxed just like everything else so but corporate bonds in the other two types of accounts and put mutual fund/stock in a taxable account.
To do this you can go to the same companies you used for your IRA, T Rowe Price, Vanguard, or Fidelity and they can help you set an account up. If you want to buy individual stocks, not mutual funds you can still do it there but there are better options but you don't want to start there yet.
So basically when you are earning enough to max out all the tax deferred and tax advantage accounts you have start dropping a little bit in taxable accounts. When you retire it will allow you to live better on less taxes and it also gives you another emergency fund.
Thursday, April 8, 2010
Post for ultimate blog party 2010
The ultimate blog party is mostly for moms but I hope I can join given that a lot of what can be learned here is for college student AND their parents. So lets join in and see what we can learn! At the end of the week I will be posting my favorite blogs and why.
My blog is about saving money for the young adult, so many blogs focus on middle age adults but the sooner we learn the money money will will save and have.
So I hope everyone likes my site and that they find other sites to enjoy as well.
There a ton of prizes to win as well, my favorites are US7- Tupperware, US 30- Nesting pillow, US 32- Target gift card and US 39- A 2 night stay at the Hilton Garden Inn (I could use that for my wedding night.
My blog is about saving money for the young adult, so many blogs focus on middle age adults but the sooner we learn the money money will will save and have.
So I hope everyone likes my site and that they find other sites to enjoy as well.
There a ton of prizes to win as well, my favorites are US7- Tupperware, US 30- Nesting pillow, US 32- Target gift card and US 39- A 2 night stay at the Hilton Garden Inn (I could use that for my wedding night.
Wednesday, April 7, 2010
Investing/ Retirement Saving Part 2
The next type of retirement vehicles is the Roth. The Roth comes in two varieties, the 401k and IRA. They have the same max as their traditional counterparts, $16,500 and $5000 respectively. They also allow extra to be put in them after age 50, $5000 and $1000 respectively.
The biggest reason to put your money into a Roth IRA or 401k is that, because you pay taxes on the money you put in, you do not pay taxes when you taxes when you take it out after 59.5 years. This means that a Roth is the best place to put your money as a young person. Your income will go up as you age, as you get raises and promotions, therefore when you start out you are paying the least in taxes. However most companies do not offer a Roth 401k, though they are becoming more popular. Therefore most people should focus on maxing out their Roth IRA as soon as they can. You can open a Roth IRA at the same places as a traditional IRA.
Another advantage of the Roth IRA is that after 5 years of opening the account, you can remove the money you have put in without a penalty. For a 401k, traditional or Roth and a traditional IRA, you would pay a 10% penalty plus the taxes. The exemption on the penalty is only for the money you put in, not the earnings/interest. This can be helpful also when you want to buy a house. For your first house you can take up to $10,000 out a IRA, traditional or Roth for the down payment, but for a Roth you can take out the up to $10,000 of the interest/earning plus all the money you put in. It is a great way to not pay taxes on the interest on the money you are saving for retirement.
I did it that way, I put 10% away in my 401k when I worked as a student and saved another $7000 in an IRA for my first house. I was lucky though, we moved to a very cheap area for my fiance's graduated school and our duplex only cost $60550, so my IRA covered most of our $12,110 down payment.
You can also use the Roth IRA as a secondary emergency fund after it has been open for five years or more. However money in your retirement accounts normally cannot be gone after so think long and hard before cashing out your retirement for bills now.
The next article will be about how to invest/save in taxable accounts and why you would save there as well as the tax differed and tax advantage accounts.
The biggest reason to put your money into a Roth IRA or 401k is that, because you pay taxes on the money you put in, you do not pay taxes when you taxes when you take it out after 59.5 years. This means that a Roth is the best place to put your money as a young person. Your income will go up as you age, as you get raises and promotions, therefore when you start out you are paying the least in taxes. However most companies do not offer a Roth 401k, though they are becoming more popular. Therefore most people should focus on maxing out their Roth IRA as soon as they can. You can open a Roth IRA at the same places as a traditional IRA.
Another advantage of the Roth IRA is that after 5 years of opening the account, you can remove the money you have put in without a penalty. For a 401k, traditional or Roth and a traditional IRA, you would pay a 10% penalty plus the taxes. The exemption on the penalty is only for the money you put in, not the earnings/interest. This can be helpful also when you want to buy a house. For your first house you can take up to $10,000 out a IRA, traditional or Roth for the down payment, but for a Roth you can take out the up to $10,000 of the interest/earning plus all the money you put in. It is a great way to not pay taxes on the interest on the money you are saving for retirement.
I did it that way, I put 10% away in my 401k when I worked as a student and saved another $7000 in an IRA for my first house. I was lucky though, we moved to a very cheap area for my fiance's graduated school and our duplex only cost $60550, so my IRA covered most of our $12,110 down payment.
You can also use the Roth IRA as a secondary emergency fund after it has been open for five years or more. However money in your retirement accounts normally cannot be gone after so think long and hard before cashing out your retirement for bills now.
The next article will be about how to invest/save in taxable accounts and why you would save there as well as the tax differed and tax advantage accounts.
Saturday, April 3, 2010
Investing/Retirement Saving
I know that when you are in school and right after the last thing you have is money to invest for retirement which is 30/40 years a way. But as you get older you will have more bills to pay and the sooner you put money away for retirement the less you have to put away.
There are a few ways to save for retirement, you can put money in tax deferred accounts, tax advantage accounts or taxable accounts. This may sound complicated but really it is not, tax deferred is when you don't have to pay tax on it when you put it in a pay it when you take it out. The types of tax deferred accounts are traditional IRA, SEP-IRA, 403b or 401k. The 403b or 401k are the same type of account but a 403b is for government workers and 401k is for the rest of us.
A traditional IRA allows a employed person or a stay at home spouse to deposit $5000 pre-tax per year into an account. If you are over 50 you can deposit an additional $1000 each year. These accounts are through your bank or broker, not your employer, however you may not put in more that you have earned from work. The best places in my opinion to but a IRA are T Rowe Price, Fidelity, and Vanguard, all of which have websites that you can use to open an account. The benfit of T Rowe Price is you can open an account for $1000 or $50/month, the downside is that they will charge you a fee of $10/year if you have an account with less that $5000 in it. Fidelity allows you to start an account with $200/month or $2500, the downside is if your account gets less that $2000 for any reason you will get a fee. Vanguard only allows you to open accounts with $3000 or more, however they normally have the lowest fees so a lot of people like them. Keep in mind these minimums are per fund, not per account, therefore most people go with a target date fund instead of having a bunch of funds. We will go over target date funds and others in a later article.
A SEP-IRA is a bit weird even for the government. SEP-IRA are IRAs for the self employed and their employees. Basically within a SEP-IRA 25% of the employees wages up to a cap ($49,000 is the cap for 2009) and the employee or employer can contribute the money to the SEP-IRA. For the owner is gets a little more complicated, it is 18.587045% of net profit also up to a cap. SEP contribution limits are computed, not from net profit, but from net profit adjusted for the deduction for self-employment tax. This is half the 15.3% FICA tax, levied on net earnings, which are 92.35% of net profit. Thus adjusted net profit (net profit minus deduction for self-employment tax) is 92.935225% of net profit. And 20% (the max percent for the owner) of that would be the 18.587045% number. After that 401k and 403b will be a snap to understand.
You can put $16,500 of pre-tax money in 401k or 403b per year, if you are under 50, if you are over 50 you can put another $5000 in pre-tax money in the account each year. The amount you can deposit can go up with inflation and is announced every year.
Next post will continue with the other types of accounts.
There are a few ways to save for retirement, you can put money in tax deferred accounts, tax advantage accounts or taxable accounts. This may sound complicated but really it is not, tax deferred is when you don't have to pay tax on it when you put it in a pay it when you take it out. The types of tax deferred accounts are traditional IRA, SEP-IRA, 403b or 401k. The 403b or 401k are the same type of account but a 403b is for government workers and 401k is for the rest of us.
A traditional IRA allows a employed person or a stay at home spouse to deposit $5000 pre-tax per year into an account. If you are over 50 you can deposit an additional $1000 each year. These accounts are through your bank or broker, not your employer, however you may not put in more that you have earned from work. The best places in my opinion to but a IRA are T Rowe Price, Fidelity, and Vanguard, all of which have websites that you can use to open an account. The benfit of T Rowe Price is you can open an account for $1000 or $50/month, the downside is that they will charge you a fee of $10/year if you have an account with less that $5000 in it. Fidelity allows you to start an account with $200/month or $2500, the downside is if your account gets less that $2000 for any reason you will get a fee. Vanguard only allows you to open accounts with $3000 or more, however they normally have the lowest fees so a lot of people like them. Keep in mind these minimums are per fund, not per account, therefore most people go with a target date fund instead of having a bunch of funds. We will go over target date funds and others in a later article.
A SEP-IRA is a bit weird even for the government. SEP-IRA are IRAs for the self employed and their employees. Basically within a SEP-IRA 25% of the employees wages up to a cap ($49,000 is the cap for 2009) and the employee or employer can contribute the money to the SEP-IRA. For the owner is gets a little more complicated, it is 18.587045% of net profit also up to a cap. SEP contribution limits are computed, not from net profit, but from net profit adjusted for the deduction for self-employment tax. This is half the 15.3% FICA tax, levied on net earnings, which are 92.35% of net profit. Thus adjusted net profit (net profit minus deduction for self-employment tax) is 92.935225% of net profit. And 20% (the max percent for the owner) of that would be the 18.587045% number. After that 401k and 403b will be a snap to understand.
You can put $16,500 of pre-tax money in 401k or 403b per year, if you are under 50, if you are over 50 you can put another $5000 in pre-tax money in the account each year. The amount you can deposit can go up with inflation and is announced every year.
Next post will continue with the other types of accounts.
Saturday, March 27, 2010
Frugal Homemaker Plus: Sticks and Stones
Frugal Homemaker Plus: Sticks and Stones
Very Insightful post, made me think.
Very Insightful post, made me think.
Friday, March 26, 2010
More tax information for students
Did you know that neither you nor your parents determine if you are a dependent after you turn 18? The IRS does and they have a specific formula to decide and it depends on how much you and your parents spend on you. However there is a twist, all student loans but not scholarships, for this, count as income.
To calculate if you are a dependent there is a very easy worksheet on pg 20 of publication 501 from the IRS, http://www.irs.gov/pub/irs-pdf/p501.pdf, fill it out honestly and you will know if you are considered a dependent for your parents according to the IRS. Often students are not considered dependents because of working or student loans but parents continue to claim them.
Overall it may be financially better for the parents to claim the child then for the "child" to claim themselves because it may allow for more deductions at a higher percent for the parents than the "child". For example, when I was under 24, my mom was being taxed at the 25% tax bracket and I was being taxed at the 15%. I would pay less in taxes than her for the amount of the dependent which was about $3000. However, technically, the IRS does not give parents that choice, if some how they find out they will force the parents to not claim the dependent and allow the student to claim themselves. Keep in mind this will cause problems with your parents and you may not want to force the issue.
To calculate if you are a dependent there is a very easy worksheet on pg 20 of publication 501 from the IRS, http://www.irs.gov/pub/irs-pdf/p501.pdf, fill it out honestly and you will know if you are considered a dependent for your parents according to the IRS. Often students are not considered dependents because of working or student loans but parents continue to claim them.
Overall it may be financially better for the parents to claim the child then for the "child" to claim themselves because it may allow for more deductions at a higher percent for the parents than the "child". For example, when I was under 24, my mom was being taxed at the 25% tax bracket and I was being taxed at the 15%. I would pay less in taxes than her for the amount of the dependent which was about $3000. However, technically, the IRS does not give parents that choice, if some how they find out they will force the parents to not claim the dependent and allow the student to claim themselves. Keep in mind this will cause problems with your parents and you may not want to force the issue.
Monday, March 22, 2010
Free Cone Day
March 23rd is free cone day from Ben and Jerry's. Just go on the Ben and Jerry's website for the closest participating Ben and Jerry's and get a free cone from 12pm to 8pm. They have been doing this for a while so they keep everyone moving in line but this is a big event so expect to wait in line for a while.
Have fun with free ice cream for spring.
Official website
http://www.benjerry.com/
Have fun with free ice cream for spring.
Official website
http://www.benjerry.com/
Thursday, March 18, 2010
Credit for the college student
No not college credit, but a good credit score and the ability to get a credit card or loan. Getting a credit score became harder since the passing of the credit card act of 2009, which no longer allows for students to get a credit card unless their parent cosigns or they have sufficient income. I have been unable to find out from credit companies what sufficient income is, I honestly do not believe they know. I wonder why the government did not make that clearer for the credit card companies as well as the consumer.
I think the parts of the credit act are great for example they must apply your payments to the high interest charges first (they used to apply it to the lowest), and the fact that they cannot change the rate for the previous purchases. However I have great issue with the government not allowing students to get credit cards, we are adults and should be able to make financial decisions as adults. This does not effect students who's parents are supporting them but it does effect those of us trying to get through school on our own. I find it horrible that we can access private student loans, that have less protection for students and are bankruptcy proof but cannot get a credit card which has rewards and protection.
The best way for a student now to get a credit card is ask their parents to co-sign but if that does not work, get a student loan and pay back during school.
I think the parts of the credit act are great for example they must apply your payments to the high interest charges first (they used to apply it to the lowest), and the fact that they cannot change the rate for the previous purchases. However I have great issue with the government not allowing students to get credit cards, we are adults and should be able to make financial decisions as adults. This does not effect students who's parents are supporting them but it does effect those of us trying to get through school on our own. I find it horrible that we can access private student loans, that have less protection for students and are bankruptcy proof but cannot get a credit card which has rewards and protection.
The best way for a student now to get a credit card is ask their parents to co-sign but if that does not work, get a student loan and pay back during school.
Thursday, March 11, 2010
Saving using the internet
There are many cash back sites on the internet, my three favorite are upromise, ebates, and bondrewards.
Upromise is designed specifically for college students and their families. A student can sign up for it and give their family a link and the entire family could get cash back for the college student. However it gets better, there are upromise surveys which will give you one dollar every once in a while as well as a few non purchase click throughs which you can get a bit of extra money. There is also a link to erewards.com which is surveys that can get you up to an extra $50 a year.
You can link upromise to a high yield savings through Sallie Mae and get an extra 10% of the money you have received from upromise in the the high yield saving. You need to set up automatic transfers of $25 a month to the high yield saving to get the extra money though. The interest rate on the Sallie Mae high yield savings account is about average for high yield saving.
Ebates is similar to upromise, however ebates.com is a little more high tech. Whenever you earn more than $5.01 they send it to your paypal account, no work on your part. That makes ebates superior to upromise. I love how easy it is to get the money. However, you may not get the money unless you have over $5.01, for over a year I had $3 sitting there not earning interest or anything because I had not gotten the amount I needed. However $5.01 is not a lot of money and ebates is the only cash back site that gives cash back for purchases on ebay so for that alone, makes it worth the two to five minutes to set it up. Also ebates allows for referrals. For every person you refer and they make once purchase you get $5 as do they. However that $5 is not included in the $5.01 that you need to earn to get the money.
BondRewards is the most unusual of the cash back sites. Bondrewards will only give you the cash back once you have reached 50 bond dollars, but 50 bond dollars do not equal $50. You can cash in 50 bond dollars for $25 or a $50 E bond. However to buy a $50 E Bond only costs $25 but the bond will not be worth $50 for another twenty years. Therefore when comparing bondrewards to other cash back sites, divided the percentage back by two to be able to get a equal comparison.
Depending on what website you are buying from will determine which cash back site is best for you at that time. A lot of the time, the cash back will be identical however each cash back site above has websites that the others do not, that I buy from and given that it does not cost me anything to sign up, I use all three. I find the website with the best deal and then go to all three sites and see which site gives me the best cash back. It only costs me five to ten minutes per purchase and it normally saves me about three percent of the purchase.
Upromise is designed specifically for college students and their families. A student can sign up for it and give their family a link and the entire family could get cash back for the college student. However it gets better, there are upromise surveys which will give you one dollar every once in a while as well as a few non purchase click throughs which you can get a bit of extra money. There is also a link to erewards.com which is surveys that can get you up to an extra $50 a year.
You can link upromise to a high yield savings through Sallie Mae and get an extra 10% of the money you have received from upromise in the the high yield saving. You need to set up automatic transfers of $25 a month to the high yield saving to get the extra money though. The interest rate on the Sallie Mae high yield savings account is about average for high yield saving.
Ebates is similar to upromise, however ebates.com is a little more high tech. Whenever you earn more than $5.01 they send it to your paypal account, no work on your part. That makes ebates superior to upromise. I love how easy it is to get the money. However, you may not get the money unless you have over $5.01, for over a year I had $3 sitting there not earning interest or anything because I had not gotten the amount I needed. However $5.01 is not a lot of money and ebates is the only cash back site that gives cash back for purchases on ebay so for that alone, makes it worth the two to five minutes to set it up. Also ebates allows for referrals. For every person you refer and they make once purchase you get $5 as do they. However that $5 is not included in the $5.01 that you need to earn to get the money.
BondRewards is the most unusual of the cash back sites. Bondrewards will only give you the cash back once you have reached 50 bond dollars, but 50 bond dollars do not equal $50. You can cash in 50 bond dollars for $25 or a $50 E bond. However to buy a $50 E Bond only costs $25 but the bond will not be worth $50 for another twenty years. Therefore when comparing bondrewards to other cash back sites, divided the percentage back by two to be able to get a equal comparison.
Depending on what website you are buying from will determine which cash back site is best for you at that time. A lot of the time, the cash back will be identical however each cash back site above has websites that the others do not, that I buy from and given that it does not cost me anything to sign up, I use all three. I find the website with the best deal and then go to all three sites and see which site gives me the best cash back. It only costs me five to ten minutes per purchase and it normally saves me about three percent of the purchase.
Tuesday, March 2, 2010
Best ways to save as a student
One of your best ways to save as a student is live at home but most university students do not want to do that. What else can a student do to save money?
First, get out of the dorms. Even if you rent a room it will probably be cheaper. Or you could get an apartment on campus, though more expensive than renting a room, you have the protections of being on campus but you can cook your own meal instead of getting a meal plan. Most of the meal plans are a rip off and most of the time students should be getting one of the smallest plans because you can have breakfast in your room most of the time as well as snacks.
Second, buy used books. Most of the time the only students that buy new books from the bookstore are the ones whose parents are footing the whole bill. To save money, go to the bookstore two weeks before class and get the ISBNs of all the books. You get get books from amazon, Barnes and Noble or even half.com. My first semester of school I spent $700 on books, my last semester I spent $300.
Also if you do plan to buy books off of amazon, go to the bottom of this blog and sign up for swagbucks. You search there, and it uses google and ask.com to search and you get points to redeem for many things, the best deal of which is $5 amazon gift cards. In the last year I made $50 of amazon gift cards just for using swagbucks vs. google or yahoo. Consider that you would be spending $600/year on books, $50 is over 8% of a savings. Stocks average between 8%-12%. Basically you could save as much as your parents have earned in their investments in a year.
Third, apply for scholarships within your department, you have a better chance of winning departmental scholarships than national scholarships and small amounts add up. Ask about them your first week into the department. I won a grant to travel to a conference to present some research I had done. If I had not asked I would not have even known about it and that got me $500, which paid for most of my food and the flight to the conference.
Fourth take the subsidized loans before the unsubsidized loans and even if you do not need the subsidized loan, get them and create an emergency fund in ING Direct or other online high yield saving. This will get you in the habit of saving and not putting things on credit cards.
Fifth, use the internet! Don't just buy the computer you see in the store, do some research. Google or swagbuck online coupon codes for anything you buy online. Buy gift cards of plastic jungle and save 4%-7% of the total cost. There are so many ways to use the internet to save, I am still learning them all. Does anyone have other ideas on how to save money using the internet?
First, get out of the dorms. Even if you rent a room it will probably be cheaper. Or you could get an apartment on campus, though more expensive than renting a room, you have the protections of being on campus but you can cook your own meal instead of getting a meal plan. Most of the meal plans are a rip off and most of the time students should be getting one of the smallest plans because you can have breakfast in your room most of the time as well as snacks.
Second, buy used books. Most of the time the only students that buy new books from the bookstore are the ones whose parents are footing the whole bill. To save money, go to the bookstore two weeks before class and get the ISBNs of all the books. You get get books from amazon, Barnes and Noble or even half.com. My first semester of school I spent $700 on books, my last semester I spent $300.
Also if you do plan to buy books off of amazon, go to the bottom of this blog and sign up for swagbucks. You search there, and it uses google and ask.com to search and you get points to redeem for many things, the best deal of which is $5 amazon gift cards. In the last year I made $50 of amazon gift cards just for using swagbucks vs. google or yahoo. Consider that you would be spending $600/year on books, $50 is over 8% of a savings. Stocks average between 8%-12%. Basically you could save as much as your parents have earned in their investments in a year.
Third, apply for scholarships within your department, you have a better chance of winning departmental scholarships than national scholarships and small amounts add up. Ask about them your first week into the department. I won a grant to travel to a conference to present some research I had done. If I had not asked I would not have even known about it and that got me $500, which paid for most of my food and the flight to the conference.
Fourth take the subsidized loans before the unsubsidized loans and even if you do not need the subsidized loan, get them and create an emergency fund in ING Direct or other online high yield saving. This will get you in the habit of saving and not putting things on credit cards.
Fifth, use the internet! Don't just buy the computer you see in the store, do some research. Google or swagbuck online coupon codes for anything you buy online. Buy gift cards of plastic jungle and save 4%-7% of the total cost. There are so many ways to use the internet to save, I am still learning them all. Does anyone have other ideas on how to save money using the internet?
Sunday, February 28, 2010
Taxes for students
After a person starts working, he or she must file taxes. Technically, if you make under a certain amount you do not have to file but when I made under that amount, I did file so I could get the money I paid in, back. Taxes for young people are normally easy. So easy in fact that the federal form is call 1040 EZ. You can file using that form or google turbo tax free file and you can file your federal tax online. Some states also have free filing. If you do not have a complicated return do not go pay someone something that you can do in less than an hour.
You need to file your tax return to fill out your FAFSA so try not to wait till April 15, 2010.
You need to file your tax return to fill out your FAFSA so try not to wait till April 15, 2010.
Friday, February 19, 2010
FAFSA- Free Application for Federal Student Aid
The FAFSA is the main way for students to get financial aid for college. You can get scholarships if you do not do the FAFSA but grants and federal loans require it. To do the FAFSA the student and the parent (if the student is under 22) need to gather their tax information. The same information a person needs to file their taxes is needed to file your FAFSA. Given that some of the money is first come first serve and some states have very early deadline, it is a good idea to complete your taxes and then your FAFSA as soon as you get all your paperwork from companies you work for or earn interest from.
Now for the tricks.
1. Money belonging to the student is assumed to pay for college where the money belonging to the parent is considered only partially set aside for college. So any money belonging to the student should be used up first or moved to the parents name.
2. Also if the grandparent or other relatives want to help, do not give the student cash until the bill is due. For example a textbook would be better than the same amount in cash. The money the grandparent or relative has is not counted but once it is the students hands it is counted.
3. Income from a job is considered to be used for expenses for college and may keep the student from financial aid. However jobs on campus (work-study) are considered part of the financial aid. You can get a job off campus using work-study if it met certain requirements from the financial aid office.
4. The FAFSA does not count into the formula any debt you have, however it will count any cash, therefore pay off any debt you can before filling out the FAFSA. Pay all your bills that you can before you apply as well.
Now for the tricks.
1. Money belonging to the student is assumed to pay for college where the money belonging to the parent is considered only partially set aside for college. So any money belonging to the student should be used up first or moved to the parents name.
2. Also if the grandparent or other relatives want to help, do not give the student cash until the bill is due. For example a textbook would be better than the same amount in cash. The money the grandparent or relative has is not counted but once it is the students hands it is counted.
3. Income from a job is considered to be used for expenses for college and may keep the student from financial aid. However jobs on campus (work-study) are considered part of the financial aid. You can get a job off campus using work-study if it met certain requirements from the financial aid office.
4. The FAFSA does not count into the formula any debt you have, however it will count any cash, therefore pay off any debt you can before filling out the FAFSA. Pay all your bills that you can before you apply as well.
Monday, February 15, 2010
Wonderful Article
I came across an article that talks about what questions people should ask after they get engaged but before they are married. I am engaged and these questions sound like a great starting point.
This article may not seem appropriate for this blog but this blog is about helping young people start their lives off right, financially and marriage may be a part of that.
http://online.wsj.com/article/SB126609755215845867.html?mod=rss_Today%27s_Most_Popular
This article may not seem appropriate for this blog but this blog is about helping young people start their lives off right, financially and marriage may be a part of that.
http://online.wsj.com/article/SB126609755215845867.html?mod=rss_Today%27s_Most_Popular
Friday, February 12, 2010
Perkins Loans
The Perkins loan is only for undergraduate students with extreme need. However what is extreme need? That is up to the school itself. Often it means that your parents have a low income and more than one student in school. If you are eligible for a pell grant you are more likely to be eligible for a Perkins loan. The Perkins loan is however, the best kind of loan to get for now, it has an interest rate of 5% fixed and lower fees than the stafford loan. However as time passes the interest of the stafford loan will decrease until it is only 3.4% and combined with the pell grant, that may be the better choice. It all depends on how much money you need for your expenses that year and what year it is.
If however you get a pell grant and do not receive the perkins loan and need more aid, go talk to your financial aid office. This is the one loan they have control and flexibility over. Do not, however, talk to the front desk person, make an appointment with someone behind the front desk, who has decision making abilities and you may get more help than you expect.
If however you get a pell grant and do not receive the perkins loan and need more aid, go talk to your financial aid office. This is the one loan they have control and flexibility over. Do not, however, talk to the front desk person, make an appointment with someone behind the front desk, who has decision making abilities and you may get more help than you expect.
Sunday, February 7, 2010
PLUS loans
Plus loans are either for parents of undergraduates or for graduate/professional students. These loans are different than other federal loans in that they require a check check and minimum score. It is possible to have a co-signer for both types of loans if the parent or student (depending on the type of loan) does not have a good enough score.
The yearly limit on both types of PLUS loans is equal to your cost of attendance minus any other financial aid you receive. The interest rate is dependent on what program your school works with, either 7.9% or 8.5%. There are also fees of up to 4% to get the loan. Graduate/ professional students also must have applied for their annual loan maximum eligibility under the Federal Subsidized and Unsubsidized Stafford Loan Program before applying for a Graduate/Professional PLUS loan. This a good things because the fees and interest rates are better for stafford loan than plus loans.
Just like a stafford loan, to receive a PLUS loan, the student/parent must fill out the FAFSA.
The yearly limit on both types of PLUS loans is equal to your cost of attendance minus any other financial aid you receive. The interest rate is dependent on what program your school works with, either 7.9% or 8.5%. There are also fees of up to 4% to get the loan. Graduate/ professional students also must have applied for their annual loan maximum eligibility under the Federal Subsidized and Unsubsidized Stafford Loan Program before applying for a Graduate/Professional PLUS loan. This a good things because the fees and interest rates are better for stafford loan than plus loans.
Just like a stafford loan, to receive a PLUS loan, the student/parent must fill out the FAFSA.
Thursday, January 28, 2010
Federal Student Loans- Overview and Stafford Loans
There are actually many different types of federal loans. 1. Stafford Loan, which this article will cover. 2. PLUS loans for parents and graduate students. 3. Perkins loans. Perkins and PLUS loans will be covered in later articles.
Stafford loans are broken into two categories subsidized and unsubsidized. The difference is that for subsidized loans the government subsidized the student by paying the interest until the student stop going to school at least part time. With the unsubsidized loan the student must pay the interest accrued during school. Therefore subsidized loans, if you can get them, are a better deal than unsubsidized loans. Even if this is not enough to convice you subsidized loans have an interest rate of 5.6% this year for undergraduates vs 6.8% for unsubsidized loans or subsidized loans for graduate students.
Therefore why would someone get a unsubsidized loan? Mostly because anyone who fills out a fafsa (free application for federal student aid) can get one. This means that no first time student should be unable to get this aid. Or maybe the aid one gets is not enough to pay for the expenses.
This chart shows how large a loan a student may potentially get and how much may be subsidized.
If a student is getting aid from the university or college in the form of a tuition waver or scholarship, the amount of student loan aid can be decreased. Thankfully the unsubsidized loan aid will be decreased before the subsidized loan aid.
This is in reverse if the student or parent makes additional income. It is always better for a student to get a scholarship or grant than a job off campus. Later articles will cover working on campus and why that is better than a job off campus.
Stafford loans are broken into two categories subsidized and unsubsidized. The difference is that for subsidized loans the government subsidized the student by paying the interest until the student stop going to school at least part time. With the unsubsidized loan the student must pay the interest accrued during school. Therefore subsidized loans, if you can get them, are a better deal than unsubsidized loans. Even if this is not enough to convice you subsidized loans have an interest rate of 5.6% this year for undergraduates vs 6.8% for unsubsidized loans or subsidized loans for graduate students.
Therefore why would someone get a unsubsidized loan? Mostly because anyone who fills out a fafsa (free application for federal student aid) can get one. This means that no first time student should be unable to get this aid. Or maybe the aid one gets is not enough to pay for the expenses.
This chart shows how large a loan a student may potentially get and how much may be subsidized.
| Dependent student | Independent student | |
|---|---|---|
| 1st-year undergraduate | $5,500 (maximum $3,500 subsidized) | $9,500 ($3,500) |
| 2nd-year undergraduate | $6,500 ($4,500) | $10,500 ($4,500) |
| 3rd- and 4th-year undergraduate | $7,500 ($5,500) | $12,500 ($5,500) |
| Graduate/professional | NA (All graduate and professional students are considered independent.) | $20,500 ($8,500) |
If a student is getting aid from the university or college in the form of a tuition waver or scholarship, the amount of student loan aid can be decreased. Thankfully the unsubsidized loan aid will be decreased before the subsidized loan aid.
This is in reverse if the student or parent makes additional income. It is always better for a student to get a scholarship or grant than a job off campus. Later articles will cover working on campus and why that is better than a job off campus.
Thursday, January 21, 2010
Student Loans-Overview and Private
Most students will end up taking out loans for school. But it is hard to know what loans to take and which to avoid. Student loans are broken into two basic categories federal and private. Federal student loans are backed by the federal government whereas private student loans are not consider to be back by the government. This article will cover private student loans and future articles will cover the different types of federal student loans.
Private loans are the WORSE type of loan to get. The consumer aka the student and parent if he or she cosigned have less protection that they would with a credit card and often the rate can be worse than a credit card. I once tried to see about getting a private student loan and called up a company that had sent me an offer. They were unable to give me an approximation of my rate unless I applied, even when told my credit score was over 760. The best approximation they could give me was 6-25%. Given that my credit card from my credit union had a fixed rate of 9.9, I was not very impressed.
With the credit card regulations in play private student loans are an even worse deal, than credit cards. There are no regulations on how they change your rate and student loans, even private ones, cannot be discharged by bankruptcy. So basically private student loan companies hold all the cards and have no reason to work with you.
Unfortunately the new credit card regulations also limit the ability of someone under 21 to get a credit card, unless their parents cosign or they have "sufficient" income, however no one has defined sufficient to me or anyone else.
If one still feel that he or she must get a private student loan, most credit card companies or banks offer them, however because of the credit crunch many of these companies are beginning to stop offering them.
Private loans are the WORSE type of loan to get. The consumer aka the student and parent if he or she cosigned have less protection that they would with a credit card and often the rate can be worse than a credit card. I once tried to see about getting a private student loan and called up a company that had sent me an offer. They were unable to give me an approximation of my rate unless I applied, even when told my credit score was over 760. The best approximation they could give me was 6-25%. Given that my credit card from my credit union had a fixed rate of 9.9, I was not very impressed.
With the credit card regulations in play private student loans are an even worse deal, than credit cards. There are no regulations on how they change your rate and student loans, even private ones, cannot be discharged by bankruptcy. So basically private student loan companies hold all the cards and have no reason to work with you.
Unfortunately the new credit card regulations also limit the ability of someone under 21 to get a credit card, unless their parents cosign or they have "sufficient" income, however no one has defined sufficient to me or anyone else.
If one still feel that he or she must get a private student loan, most credit card companies or banks offer them, however because of the credit crunch many of these companies are beginning to stop offering them.
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