1 Million Dollars

Tuesday, July 26, 2011

How to Create a Emergency Fund and Why YOU need one

A emergency fund is a hard thing to build in general, but for students it is harder then the average. Many students are living on student loans, some that charge interest and financial aid penalizes you for any assets, beside money in retirement accounts, a car and a house.
Students often have very little time between school, studying, extra-curricular and work needed to survive and pay for school. But often students need an emergency fund, just like anyone else. Unless mom and dad are paying for everyone of your expenses you need an emergency fund. But how much you need depends on where the income is coming from and what your expenses are.
Do you have a car? Then you need money to fix it, if it breaks and that money comes from your emergency fund.
Often the best way for students to create a EF is work like crazy during the summer. But you might be saying, the summer is almost over, what now? You still have a month and there is so many different things you can do. If you have not signed up for mypoints or swagbucks you are loosing money every month. They are the easiest ways I know to get giftcards and it is not like students are never on the computer. You can sign up for swagbucks at the bottom of this blog and start with extra points. Remember the little things add it, a dollar or two here or there will add up to hundreds. Are any friend's parents or parent's friends going out of town and need someone to pet sit? That is money in your pocket and you get some time away from your parents, too. Are there any older people in the neighborhood that need their lawns mowed? Find side hustles and put that income into your saving. That is the most important thing to do.

While you are doing that, are you working at your main job as much as you can, if you have one? Remember you want to best the employee you can, so when you come back for summer and winter break they want to hire you again.

While you are doing all of this, you need to look at your financial aid. Is it grants and scholarships or is student loans? If the aid is student loans, what kind of student loans, subsidized or unsubsidized? Can you get work study? Work study is the best way to work while you are in college. Your employer understands you are in school and that you need time off to study for midterms and finals and the income does not count against financial aid for your next year.

Wow, so much to do and only a month to do it. Does it feel impossible? It is not, just do as much as you can, that is the important part. As you earn the money put as much as you can aside, try for half but every penny you can save matters. Now it is time to open a high yield savings account. If you have $250 and get referred ING Direct will give you $25. Contact me if you need a referral.

If you have support from parents, you probably only need about $1000 as your emergency fund. Once you have that, if you have unsubsidized student loans pay them down. If you do not, open a Roth IRA at ING Direct and leave your extra money there (up to the amount you earned this year or $5000 whichever is lower). You can pull it out, if you need it without a penalty, just don't pull out the interest. That will keep most of your savings from being counted against you for financial aid.

Sunday, July 24, 2011

Hot days, Chillin' for cheap

Here in Buffalo we have seen record temperatures, by the time we leave for school it is already 85 degrees and it can hit 100 degrees during the hottest part of the day.  We do not have an air conditioner in our home, for two reasons, one, normally Buffalo is cooler than we are used to and two, air conditioning is expensive.  But this last week has made me want to run out and buy an air conditioner.  But we didn't, we found ways to cool down without air conditioning. 

We have fans, including a ceiling fan which normally are enough to keep the place cool but we had to do something else.  We ate salads, cooked using the crockpot instead of the oven because we did not want to heat the house up any more.  We also ate a ton of Popsicles, which we had gotten for free the week before combining coupons and sales.  We put ice in our drinks to cool them down more and drank at least twice our normal amount of water.  We plan to be eating more salads and fruit salads this week, I may even make a potato salad.  I just have no wish to heat up the house, or myself, cooking when I do not have to. Fruit, like grapes and berries, can go in the freezer for a good cool snack.   I have been eating a ton of fruit this week and it does seem to cool you down a bit.   

You can cool yourself down by showering in colder water, or putting damp washcloths or small towels in the freezer and put them on your neck.  Stop by a garden store or cvs/ walgreens to pick up an inexpensive mister for plants. If you fill it with cold water and mist yourself, you cool off without much cost. You can have an extra bottle in the frig for extra cooling.. Just don't mist while reading this blog because your computer doesn't like being wet.  Remember to wear clothes that make sense for this weather, wear shorts/skirts not pants and light clothes, it can make a major difference.

 In the evenings we have opened up all the windows and doors and brought in the cooler air, it may only cool down to 85, but that is better then 95-100 degrees.  We close everything and pull down shades during the day so the sun does not get to heat the house as much (a tip I learned from my mom as a child), it keeps the house 10 degrees cooler. 

Also, take advantage of places with air conditioning.  We stayed a bit later at work this week and got extra work done.  We also had fun.  We went to the movies during the matinee which was the cheapest price but got us out of the house during the hottest time(btw, Captain America was amazing).  We did our grocery shopping in the middle of the day. When we did laundry we hung most up and ran the dryer only once at night while we were going to bed. 

There were times this week I wanted an air conditioner but as long as it is just a heat wave and not the normal weather I think I stick with my fans and find other ways to cool down during the summer.  Does anyone else have cheap ways to cool down this summer?

Friday, July 22, 2011

My First Guest Post

My first guest post is now up at Grad Money Matters.
This article is about how my DH and I were able to get started in our landlording business. Any additional questions can be asked either here or there, I'll be checking both sites.

Tuesday, July 19, 2011

When would you use both the deduction and credit for higher education

As it stands the deduction and credit have the same income requirement however this was not always true and may change in the future. It used to be that the deduction had a higher income cap and that is why many adult student used it instead of the credit. So since there is no reason to use the deduction alone, when would you use it?

The reason for using the deduction is when you are spending more than the $10,000 cap for the credit. This could happen if you have multiple students using the lifetime learning credit, either in graduate school or if you are taking more than four years to finish school because of working.

The idea is to count the first $10,000 towards the credit and the remaining expenses towards the deduction. This will save you the most money on your taxes.

Sunday, July 17, 2011

Preparing for college

Classes for most universities start at the end of next month and that means bills for classes will be due sometime during this month. Do you know how you are going to pay for them? Do you even know what your options are? Have you accepted your financial aid at school yet?

Many students use their student loans to pay for school and the money they or their parents have for living expenses but that would be a mistake. If you did that, and you are still a dependent on your parents, your parents could not claim the higher education deduction or credit. The better idea is to pay for classes with your own money or your parents and then use the student loans for living expenses. If you have scholarships, they are only tax free if you are paying for school so use them as such, unless your parents want to get the tax deduction and are supporting you. If your parents are in the 28% tax bracket and you are in the 10% tax bracket, them paying the school makes and getting the deduction makes more sense then you saving tax money by using your scholarship for classes.

Keep in mind that if you are paying for more than 50% of your expenses, and this included scholarships and student loans, you are not a dependent according to the IRS. Many parents do not realize this and will continue to claim you, however if caught it can amount in major penalties, just like any of type of tax fraud.

If you are moving away for college, talk to your parents about what will happen to your room while you are away. Decide what you should take, decide if you want to get of anything. If you decide to get rid of stuff, decide if you want to have a yard sale, donate it or throw it out. Use google maps and determine if you need your car or if use a service such as zip car would be cheaper. Keep in mind the cost of parking on campus as well repair costs. Decide if you need a meal plan and if so how many meals you want. Most students use the two meal per day plan because you will not always be on campus or want to eat all your meals on campus. Decide what is important to you. Add up the costs you will be spending during this semester and school year subtract your financial aid, any money you have now and any money your parents say they will give you. Do you have enough? If not you need to fix it now!

Can you or your parent call the school and ask for a review and see if there is anything the school can do? Can your parents help a bit more? Now what can you do? Are there any people in your neighborhood that would like someone to mow their lawns or weed their gardens? Do you or your parents have friends how are going on vacation and do not know what to do with their pet? Could you offer to go over and pet sit? Can you offer to dog walk? Can you start doing surveys, open a swagbuck account or a mypoints account. None of these are big money makers but they add up. Every penny you get is one penny less you need borrow and pay back at a huge rate.

Does anyone have any other ideas for what students need to do before leaving for college?

Thursday, July 14, 2011

Another ING Deal-update

I mentioned earlier this month that my husband opened a Roth IRA with ING Direct with $1000 to take advantage of the deal that would get him an additional $76. And ING Direct, being wonderful has already deposited the extra $76. In just thirteen days, when most banks take three to four months for any bonus money.

This makes me happy, yet sad because ING Direct has been bought by Capital One and these wonderful deals are likely to be long gone very soon. I hope everyone takes advantage of the referral deal. If you do not know about the referral deal, it goes like this: you ask someone with an ING account to refer you, you open a savings account with $250 and then leave it there for 3 months and get $25 cash. Ten percent return without any risk, who could hate that?

Wednesday, July 13, 2011

Higher Education Deductions

When I posted about credits for higher education I was asked about deductions for high education and decided to put a full post about it. The sad part I have to start with is that the tuition deduction is temporary: 2011 is scheduled to be the last year that taxpayers can take this deduction. However under most cases the credits are more helpful. You would only use the deduction when you have already maxed out the credit, say you have multiple students in one household or you AGI exceeds the requirements for the credit. The maximum AGI you can have for the deduction is $160,000 if married filing a joint return or $80,000 if single, head of household, or qualifying widow(er).

It has the same limitations as the credit, can't be used for living expenses, may not be used if you are paying from a 529 or using a scholarship etc. See the credit's article for all the limitations. However, the deduction is extremely clear on one point, books or supplies bought from the college are deductible, books and supplies, even if required, bought from another source are not. This means if you buy your books online you may not deduct the cost of them via this deduction.

If married filing a joint return and your AGI is under $130,000 you can deduct up to a max of $4000, between $130,000 and $160,000 the max is $2000. If single, head of household, or qualifying widow(er) and your AGI is $65,000 or less you can deduct up to a max of $4000, between $65,000 and $80,000 the max is $2000.

Monday, July 11, 2011

Carnival of Personal Finance #317 – The Harry Potter Edition

My post on how to pay less interest on student loans without taking less students was included in the Carnival of Personal Finance- Harry Potter Edition. My first carnival and I am very excited. There are a ton of other articles at the carnival that I liked.


Head on over and check some of the articles out, my favorite is Are Rewards Cards Costing You Money? but How To Build a 6 Figure Income Dividend Portfolio with $600 per month is interesting though I do not have $600 per month to invest yet. I am about $200-$300 short of being able to invest that much. But it is good to have goals so I try to look towards the future and get ideas of what I might want to do.

Saturday, July 9, 2011

A trick to pay less interest on student loans

When students get their financial aid package their aid is given to the students twice a year during the first few weeks of the semester. The aid often composes of grants and both unsubsidized and subsided student loans. But why would you take out the unsubsidized loans right away? You probably can pay for your classes with the subsidized loans and grants and then request the unsubsidized loans a month or two later once you actually need the money for living expenses. Keep in mind most dorms allow you to pay month to month or by semester, you can choose month to month and pay less interest. It normally takes about a month to get the loan so I would request it a month before you need it.

This is what I would do for this upcoming semester. First, check how much saving you have, determine what your month will be and how long your savings will cover you. Then request only the grants, work study and subsidized loans from the school. Use this until you are only have a month and half of expenses in your savings account, then request the unsubsidized loans. If you are able to work or do work-study you may be able to stretch the money out even farther. Given that you will be using up much of your saving during the first semester you probably will need to take the unsubsidized loan during spring, sooner. That is ok, but you will save a large portion for every day you push back taking the loan so try to push it back as far as you can, while not going so far that you do not have money for living.

Thursday, July 7, 2011

Update on grocery savings plan June

I averaged $48.08/week last month on groceries. That was below my weekly allowance for groceries and I am quite please with it. I even was able to spend lower then the amount I need to bring my year to date grocery spending closer to my annual goal.
I am now averaging $51.78/week. I am at exactly halfway though the year and I am $46.22 over my goal. I am still within budget but by achieving this goal I will have more money for savings and invest or even more fun. I think I can cut $46.22 from 26 weeks even with Christmas dinner. If I am to achieve my goal of $50/week, I will have to spend average less than $48.22/week for the rest of year. This is more then I spent last month, on average and I think I can do it.

Anyone have any advice for keeping my totals low while eating well?

Monday, July 4, 2011

Free Money from BondRewards

I just cashed in 50 bondreward dollars for twenty-five dollars cash. I signed up for bond rewards in August of 2009 and this is the first cash back I have received. It probably will take me longer to earn the next twenty-five dollars because when you start off there are surveys to do to get 14 bond reward dollars. Even so, it should not take more then about another year.

Bond Rewards is similar to ebates and upromise except they send you emails that are worth .05 bond reward dollars (or $.025 cash). I normally received about enough email to get .50-.60 bond reward dollars ($.25-.30 cash) a month. They just started allowing you to update your profile every six months for another 5 bond reward dollars ($2.50 cash).

In the entire time I have had bond rewards I have only used the cash back portion of the site twice. Normally ebates or upromise are better deals but bondrewards had a tire purchasing site that the other two do not and bondrewards does double cash back on different sites, this changes monthly. They do require you to make one purchase to get cash back but given that I will need tires again, I do not see that as a problem.

Saturday, July 2, 2011

Another ING Deal

A few months back I opened a Roth IRA with $200 with ING Direct because they offered to add an additional $50 if I did. I received an email with an offer from them yesterday that if I opened a Roth IRA with $1000 they would give me $76. Because I already open one I cannot take advantage of the offer but my DH has not opened one with ING Direct so he can.

Just like the last ING deal, I am pulling the money for the deal out of my emergency fun (EF). However, unlike the last deal I am not sure when I will be able to pay it all back. I put away $420.90 every month, $400 from the rental and $20.90 from the 2% reduction in social security. However, the lease for our rental expires in September and it can take a few months to find another tenant. It is possible that our current tenants have not found a place they want to buy yet, but I like to assume the worse.

If I do not get a tenant by December I still will owe $74.60 to my EF. I hope to find a tenant, within a month or two but I am a new landlord so who knows what will happen. This also means that after next month my millionaire updates will probably be pretty boring and unchanging.

However, I will be making a 7.6% on my money before even putting it in the stock market, and its associated risk. Owing myself, not others, is a risk I am willing to take to make 7.6%.

Friday, July 1, 2011

Update on the millionaire goal-June

It is has been a disappointing month for investing in the stock market. Even with adding $220, I now have less money in my investment then I did last month. As of July 1 we have $9856. I am very disappointed, I feel like every time I reach for this goal it just pulls farther away from me.

We have decided, now that the disability insurance is paid for, to increase the amount we put towards our investments to $420.90. $400 of that comes from our rental and $20.90 comes from the two percent reduction in FICA. Over this year, as I work I will be increasing the amount we put towards our investments but since I only work part time I do not expect to increase the amount much more than a dollar or two per month.

I might be able to reach $10,000 next month, if the market does not drop more than 3%, but it seems like the stock market is not work with me lately.