Be Careful With Student Loan Pay Ahead Status And Loan Forgiveness

Pay Ahead Status

Today I want to share a scary reminder about why it’s so important to be diligent and accurate when it comes to making payments on your student loans – especially if you’re planning on applying for a student loan forgiveness program such as Public Service Loan Forgiveness.

It involves something called “Pay Ahead Status”. This is what happens when you’re amazing at paying your student loans and you pay extra each month. ​

You’d think that paying extra each month on your student loans is a good thing. And sometimes it is. But I’ve found that it can also cause a lot of problems for borrowers if you’re looking to take advantage of student loan forgiveness programs.​

How Does Pay Ahead Status Work?

​If you have a Federal student loan, and you pay more than the minimum due, that extra payment is applied to your next payment. This is called “Pay Ahead Status”. 

For example, let’s say your monthly student loan bill is $150, and this month, you pay $200. That extra $50 payment is then credited against your next bill. When it comes in the mail, it will show $100 as the amount due. ​

​The rules are the same for all Federal student loan servicers, because Federal loan rules are dictated by Congress and the Department of Education. When you pay extra, your payment is applied in the same way every time: Fees > Interest > Principal.

The only thing you and your servicer can control is how your extra payment changes the due date of your next regular payment. By default, extra payments push that due date forward.

Your payment is applied the same no matter what, and by letting the due date roll forward, you just build yourself a cushion of time when you don’t HAVE to pay. You might never need it, but a month or two of no payments could come in handy if you have a personal emergency.

How Does Pay Ahead Status Impact Student Loan Forgiveness​?

That doesn’t sound too bad, right? Well, what if you’re planning on applying for student loan forgiveness on a program like PSLF?​ Here’s where the real problems start.

Public Service Loan Forgiveness has three requirements:​

  • Have Direct Student Loans
  • Be On A Qualifying Repayment Plan
  • Make 120 Qualifying Payments While Employed At A Qualifying Public Service Entity

For PSLF purposes, a qualifying payment means a full payment based on your repayment plan amount. If you don’t make a full payment, that payment won’t count as qualifying. And here’s where Pay Ahead Status causes problems.

Let’s say your full payment amount is $150. If you pay $200 one month – that payment counts. However, the next month, your invoice amount will reduce to $100. If you only pay the $100, your payment will not qualify since you didn’t pay at least $100. But you weren’t supposed to have to pay $150 because you were in Pay Ahead Status! This is where Pay Ahead Causes real problems.

Another example, from a reader. His monthly payment each month was required to be $172.56. However, he simply rounded up his payment to $173. However, that reduced his next ​payment to $172.12. This month, his wife simply pays the exact amount because she’s not as OCD as her husband is. However, that payment doesn’t qualify for PSLF because it’s not a full payment – even though the loan servicer considers it a full payment.

The bottom line is simple: if you’re planning on getting loan forgiveness, DO NOT pay extra towards your loans.

How To Appeal ​If You’re A Victim

If you find yourself in this situation, know that the Department of Education is looking at the problem, and most loan servicers are aware of it. However, given the loan servicers don’t have an incentive to resolve it, you’ll be challenged to get it fixed.

We’ve found the following steps to be helpful (although still a struggle) to get any payments in Pay Ahead Status to qualify. In the situation above, it took our reader about 6 months to get a resolution from Fedloan Servicing. ​ They eventually allowed all the pay ahead payments he made to count towards PSLF. 

Step 1. Contact Your Lender And Remove Pay Ahead Status: If you find yourself in pay ahead status, get it removed immediately. Then, ask them to make any payments count towards PSLF.

If you’ve already filed your certification paperwork for PSLF, your loan will typically be serviced by Fedloan Servicing. They should help you with this process.

Step 2. Speak To A Fedloan Borrower Servicing Advocate: If you’re not getting anywhere with the phone rep, you need to ask to be transferred to a borrower servicing advocate. These are better trained individuals who can help get the situation resolved.

Step 3. Speak To PHEAA Consumer Borrower Advocate:  If you still can’t get anywhere with FedLoan, you can contact their parent company PHEAA and speak to a consumer borrower advocate. PHEAA directly has a contract with the Department of Education for the loan servicing, so they may be able to better assist you.

Step 4. Contact The Department Of Education Student Loan Ombudsman. The Department of Education maintains an Ombudsman program designed to help borrowers struggling with their loan servicers. The challenging part is that many Ombudsman fuctions have been outsourced to a third-party company as well, but they are still a good resource to speak to and ensure they have documentation of the issue.

Step 5. Contact The Consumer Finance Protection Bureau: Over the last few years, we’ve seen the best results for borrowers come when they contact the CFPB. The CFPB is highly engaged in resolving student loan servicing issues, and they should be able to help cut through some of the bureaucracy. ​

If you’re still struggling to get answers, it could also make sense to speak to a student loan lawyer regarding your situation. ​Given that the value of loan forgiveness can be high, it might be worth paying a lawyer yo help you get this resolved. Make sure you find a lawyer that is an expert in student loan debt issues.

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Adults Can Do Whatever They Want

adulting

Here’s a convo my 5 y/o son and I had the other day:

5 y/o: “What are you eating over there???”

Me: “A chocolate bar – mmm mmm it’s tasty.”

5 y/o: “How come you can have a chocolate bar right now and I can’t?”

Me: “Because I’m an adult – and adults can do whatever they want.”

I probably should have said “Because you’re still eating your dinner” or “you can have one later” or “here’s a little piece of it if you pay attention to the lesson I’m about to teach you,” but instead I played the adult card. And I ain’t gonna lie – it felt good 🙂

Also, scary.

Think about just how FREE all of us really are right now? And how much damage/trouble/awesomeness we can get into at any point of our lives now that we’re on our own? Don’t want to do the dishes? Forgettabout it! Want to sit on your ass and gorge yourself of ice cream and Netflix? Go for it. Want to call in sick and play video games all day long? I get controller #1!

Sure we still have bosses and spouses and police officers keeping us all in check (“I swear officer, I thought it was Halloween! I wasn’t trying to take all the bank’s cash, I was trick-or-treating!”), but at the end of the day we really do get to do whatever the hell we please.

And that’s exactly where the scary part comes in. Because unfortunately, there’s also this thing called “consequences.”

Webster Dictionary defines it as…. Pshh. Y’all know what consequences are! (Why do writers always go down that route btw? As if we’re all so dumb we literally need to go back a couple decades and bring out the dictionary??)

Here was the rest of the convo w/ my 5 y/o:

5 y/o: “But daaaaaaad, that’s not fair!”

Me: “Well, there’s also these things called “consequences” when you do things as an adult. For example, if I eat this chocolate bar I may get fat or get a toothache or upset your mother for taking the last one from the box (psst – don’t tell her!). So while it is cool we get to do whatever we want, we also have to make sure we’re okay with any bad stuff it can bring, especially if it affects someone around us.”

5 y/o:”What does affect mean?”

Me: “Look it up in the dictionary.”

(Just kidding… although this is the right way to bring up a dictionary ;))

Me: “It means everything you do can change something else. If you go and hit your brother right now, he’s going to cry and then you’re going to your room for a time out. Just like if I were to hit our neighbor I’d probably be hauled off somewhere too – called jail. So even if you want to do something sometimes, it’s good to think twice about it unless you really like getting into trouble.”

5 y/o: “Ahh… I can’t wait until I become an adult.”

Me: “So you can eat chocolate bars?”

5 y/o: “No, so I can punch my brother!”

*facepalm*

I started reading this new book called 10% Entrepreneur by Patrick McGinnis, and it reminds me a lot of this adult stuff. Simply for the fact that it helps contain us more, despite our brains thinking other avenues could be better for us.

For example, everyone thinks self-employment is all rainbows and freedom and full of cash money millionaires. And while that’s partially true, there’s also a whole other dark side to the game when things are anything but. I can’t tell you the times I’ve considered shutting it all down or getting a new job or not knowing if I’ll be able to support my entire family from this crazy thing called “a blog.” Yes it’s fun and yes there are advantages up the ying-yang, and technically you don’t ever have to work if you don’t want to and just take off traipsing around the world, but at the end of the day it all rides on your shoulders and your shoulders only because you’re The Boss. It’s a roller coaster of emotions, and you’re not wearing any seat belts.

Without self – and emotional – control, you’re doomed.

Which is the basis of the 10% entrepreneur idea… I’ve only read the first handful of pages so far, but the notion is that it allows you to still dabble in making money on the side and starting your own hustle, but with only 10% of the effects. You’re still tied to your day job and the structure, but you also get to reap the rewards of putting yourself out there. And I’m going out on a limb and will say that the amount of *positive* return on that effort will likely be much greater than 10% too – making the deal even sweeter.

As the tagline of the book goes: live your startup dream without quitting your day job. Check it out if you’ve always wanted to dip your toes into business – it could be a good solution for ya!

10 percent entrepreneur

The 10% Entrepreneur: Live Your Startup Dream Without Quitting Your Day Job

With everything in life, there’s things we WANT or THINK we want to do, and then there’s the realities of what could happen if we act on them. Eating a chocolate bar won’t cause much of problem alone, but if you’ve already eaten 87 of them or have high sugar levels or they cost $7.00 a pop, then yeah – you’re probably going to have issues.

Just like if we sit on our asses watching TV all day or quit our jobs on a whim to start a new venture or anything else we desire in our lives. Moderation: good. Extremity: usually not so much.

We all need some structure in our lives, or at least a set of rules to follow – even if we make them ourselves. This is the basis of personal finance, after all.

  • Spend less than you make – RULE
  • Save/invest the difference – RULE (and an important one!)
  • Pay off your credit cards at the end of every month – RULE (this counts even if you’re a hacker gobbling up all the free points and miles and cash back, btw. The second you leave balances on those cards the benefits start diminishing!)
  • Protect your wealth/stuff/family with insurance – RULE. A boring rule, but a rule nonetheless
  • Always be learning and reading Budgets Are Sexy – RULE. The best rule 😉

Our lives are riddled with rules and for good measure. But that’s another benefit of being an adult – WE GET TO MAKE THE RULES NOW!! How sweet is that?? We may not enjoy following them all, but if you want the life of your dreams – both now and in the future – the rules are a necessary part of making it happen.

My son now goes around the house telling people whether they can, or cannot, do things based upon their adultness – even visitors. The lesson’s sunk in, but only if he knew how good he really has it. Free food, toys, and shelter, without any care or responsibility in the world?

I don’t know about you, but I’d gladly trade my chocolate bar for that!

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The Beginner’s Guide To Building CD Ladders

The Beginner's Guide To Building CD Ladders

​As interest rates in the broader market rise, banks are starting to offer decent rates on their Certificate of Deposit Accounts (CDs). If you’re a saver who wants to earn more than your checking account offers, consider investing in a CD ladder.

A CD ladder won’t make you rich, but it’s a useful tool for mid-term savings goal and investment withdrawals. This guide explains how to create a CD ladder that fits your goals.

Certificate Of Deposit Basics​

A Certificate of Deposit (CD) entitles the account owner to a set interest rate for a given period of time. As the account owner, you must keep your money in the account for the set time, or you’ll face an early withdrawal penalty.

Withdrawal penalties typically range from 1 month of interest to 12 months of interest. While it’s wise to hold your CDs to maturity, you won’t be devastated if you have to withdraw early in the event of an emergency or opportunity.​ 

CDs are FDIC insured, so you can’t lose your principal balance (unless you withdraw right away). Since these products bear no market risk, you can’t expect huge interest rates on the products. In fact, in recent years, CD interest rates haven’t matched inflation.

As a result, you shouldn’t think of CDs as wealth building vehicles. Instead, they offer some protection from inflation while protecting your principal.

What Is A CD Ladder?​

A CD ladder isn’t some complicated financial product. It’s just a fancy way of saying that you should divide your savings into CDs with different maturities. For example, a person with $10,000 to invest might invest $2,000 in five different CDs ranging in maturity from one through five years.

As CDs come to maturity, that investor can choose whether to reinvest the money or to spend it according to their goals. Below, we outline how to create a CD ladder for cash flow and a CD ladder for mid term savings goals.​

A CD ladder offers benefits that a long term CD does not. First, a CD Ladder offers more liquidity than a long term CD. In a CD ladder, a CD comes to maturity every year, so you can access your money without paying withdrawal penalties.

Even more importantly, a CD ladder protects you from interest rate risk. Let’s say you have $10,000 and you put it all into a five year CD yielding 2.3%. If interest rates on CDs fall to 1% you’ll feel like a genius. If interest rates on CDs rise to 6%, you’ll feel disappointed about all the interest you’re not earning.

By dividing your money into CDs with different maturities, you protect your money from interest rate movements. If interest rates go down, you still have some of your investment locked in at today’s higher interest rate. If interest rates go up, you can reinvest a mature account into a higher yielding CD.​

Creating A CD Ladder For Cash Flow​

Many retirees use CD ladders to manage their cash flow during retirement. A CD ladder allows retirees to keep a portion of their investment portfolio in a very liquid and low volatility asset (CDs). When a CD comes due, the retiree can cash out a portion of their stocks/bond portfolio and invest in a 2-3 year maturity CD.

During bull markets, a CD ladder makes a lot of sense for retirees. It keeps 1-2 years worth of money safe while allowing the rest of the portfolio to grow.

However, financial advisors may suggest that retirees should “break” their CD ladder during a market downturn. This allows the stock and bond portfolio to recover before the retiree makes any further withdrawals.

We won’t give specific advice on portfolio withdrawal strategy for retirees. Instead, we will offer a theoretical explanation of CD ladders for cash flow.


Imagine a couple who plans to spend $20,000 per year from their portfolio. A year prior to their retirement, they may invest $40,000 into two different CDs, a one year CD and a two year CD. 

At the start of their retirement, they first CD comes to maturity. They use that $20,000 to fund their living expenses. At the same time, they withdraw $20,000 from their stock portfolio and invest it in a 2 year CD. 

If the couple wanted to have a three year CD ladder, they would split $60,000 between three CDs, and then each year they would reinvest into a 3 year CD.

Creating A CD Ladder For A Midterm Goal​

If you’re creating a CD ladder for a midterm goal, your CD ladder may become a bit more complicated. This is because you’ll need to reinvest new savings and mature CDs throughout the process. As a result, we recommend weighing your initial investment more towards the long term.

For example, if you want to buy a house in five years, and you have $10,000 saved so far, consider putting $6,000 in a 5 year CD, and $1,000 in a 1-4 year CD. 

Each year, you will invest your new savings and the mature CD into a new CD that will mature the year you need your savings. For example, after your first year, you will invest the $1000+ interest from your first CD and any new savings into a 4 year CD. 

After five years, all of your investments will mature at the same time, and you can buy a house.

Where Can I find the Best Interest Rates on CDs?​

When you start a CD ladder, you don’t want to invest in whatever CD is offered by your bank or credit union. My bank offers a paltry .15% on 1 year CDs. I earn more than that on my checking account. 

Fidelity (our favorite free online discount broker) offers a CD ladder building tool that makes building a CD ladder super simple. Consider opening an account at Fidelity here.​

You can also open a CD directly at a bank. We recommend online banks because they typically offer much better yields on CDs. Check out this list of CDs – their maturities will work well for a CD ladder:

Where ever you open a CD ladder, just make sure that you’re getting a good yield and following the pattern mentioned above.

Have you ever thought about investing in a CD? Why or why not?​




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Ten Moves That Will Skyrocket Your Net Worth

skyrocket your wealth

[My man ESI makes a return today to share his tips on what to REALLY focus on in order to grow our wealth exponentially. You might remember him from his previous post that went viral on the 10 things he didn’t expect in early retirement, which he’s still very much in and still very much enjoying 🙂 Thanks for taking the time, good sir!]

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We all have money tips coming out our ears. Do this. Don’t do that. Do this or that. And on and on… The advice seems endless. So much so that if you try to follow them all you’d end up with no time to actually live your life.

At the same time, all money tips are not created equal. While many are valuable, there are some that are exponentially better. These are the tips that will make you wealthy.

So let’s get to the good stuff and cast the rest aside for now. Based on the experience of managing my own money — allowing me to accumulate a few million dollars and retire at 52 — here are my recommended ten big financial moves that will propel your wealth skyward!

#1. Get an advanced education in a valuable field

College degrees can add significant wealth. There’s no debate that (on average) the more education you have, the more you’ll earn and the less likely you are to be unemployed.

And if you can keep debt low while getting the degree (and there are reliable ways of doing this), then it’s almost guaranteed that getting a college degree is a good deal.

Even better is getting a degree in the right field. It’s well-known that certain careers pay more than others. Pick one that is closer to the top than the bottom and you’re finances will thank you for it.

Consider this finding:

College graduates earn $1 million more than high school graduates over their lifetime, and the income gap between the highest-paid college majors and the lowest-paid is more than $3 million dollars.

To make even more, get an advanced degree in a high-paying field. This is where the big money can kick in.

I got an MBA by spending a grand total of $5k for six years of college (because I was willing to work during school and got good grades). My MBA was worth an extra $1 million to $2 million, even though I only worked until I was 52. If I had stayed employed into my sixties you could take on a few more million.

Of course, you have to factor in abilities and interests when picking a career. But most people have at least a handful of fields that would work for them. If they select one which pays a bit more, they will be making a solid financial decision which can help them become quite wealthy over time.

#2. Focus on growing your career

Even if you don’t pick a vocation in the highest-earning field, your career is a multi-million dollar asset. If you don’t believe me, take a starting salary of $40k, add in 3% annual raises over 45 years, and look at the result. You’ll have earned $3.7 million.

Even better, you can manage your career to get those 3% average raises even higher. Doing so will help you earn millions more throughout your career.

Take the same numbers from above and instead of 3% raises use 8.16% raises. The difference is over $10 million!

Think it can’t be done? I averaged 8.16% increases for 28 years using seven steps that grow any career. Plus, it took me years to figure out the seven steps. You don’t have to go through that trouble, so you have the potential to do much better than I did.

Of course, 8.16% could be considered on the high side. So let’s go low. Let’s say you average 4% annual raises. That extra 1% will allow you to earn an extra $1.1 million more than what 3% raises would.

Any way you look at it, managing your career for income growth will have a huge impact on your finances.

#3. Control spending

No matter how much you make, you can spend it all. We don’t have to look far to find examples. It’s almost a cliche that high-income actors and sports stars go bankrupt. People who have made millions somehow spend it all and then some. As a result, they are often left with nothing (or less).

A bit closer to home, you can see this principle play out across our country.

The median American household annual income is $51,939. U.S. households median net worth is $80,039. This means that over a 40-year period at an 8% return rate, the average American is saving a paltry $310 a year. What are they doing with all the rest? They are spending it!

On the other hand, those who control their spending do much better.

Assume a family can save $5k per year (less than 10% of their income). In 40 years at 8% they will have a net worth of $1.3 million. See what even a little bit of saving can do over a lifetime?

And this doesn’t mean you have to save on EVERYTHING, just some things. Enjoy your life by spending on what you want here and there, just keep it in line so you have excess to save and invest. Even 10% will make you wealthy over time.

Personally, I wanted to do better than average and was able to save 36% of my income. Others have saved much more. If we can do it, so can you. (See: Proof You Can Live off 50% of Your Income)

There are two major areas to control spending: on the big things, and on the little things.

Big things like homes, cars, extravagant vacations, and the like can bust your budget in a single move. Little things like eating out for lunch regularly, smoking a pack of cigarettes daily, and, dare I say, drinking $5 cups of coffee several times a day don’t seem like much, but they can add up to big dollars over time.

#4. Eliminate debt

Debt is a financial killer, especially consumer debt. And yes, even “good debt” like a mortgage and student loan debt can be bad in many situations. Look no further than 2008 for housing debt and the current issues with student loan debt.

The average American will spend hundreds of thousands of dollars in interest over the course of his/her lifetime. Imagine if this expense was eliminated or even cut in half and invested? This move alone would make anyone’s net worth sky-high.

We eliminated all debt over 20 years ago when we paid off our mortgage. We had already retired our car loans and a personal loan. Then we focused everything on paying off the mortgage. It started with buying a house we could afford — one half the price the bank wanted to lend to us. We then took all extra cash — bonuses, financial gifts, etc. — and put them against the mortgage. We cut spending as well and made extra payment after extra payment.

Less than a decade later, we were completely debt free.

Not having debt for two decades allowed us to dramatically increase the amount we saved, which in turn super-charged our net worth.

#5. Invest early and often

You’ve probably heard that time is your greatest investing asset. It’s true. The more investments earn and grow on their own, the greater they become.

Investment value is also greatly impacted by the amount invested.

These two factors are why you want to put away as much as you can as soon as you can. Fortunately, both of these decisions are within your control.

Return rate is the third variable in the investment growth equation and gets most of the press. However it’s actually the least important of the three in determining your overall results. Furthermore, beating the averages in return rate is virtually impossible.

You can spend hours and hours trying to find the right investments, only to not pick a winner. Or you can just invest in low-cost index funds and let them do the work — and beat 95+% of investments over time! This is what I’ve done and what I recommend.

Finally, you have to stick with it, which may be the hardest investing choice of all.

I remember back in 2008-2010 when things were really dicey. My portfolio was down big-time. I had put money in all the way down and there was no sign it was going to come back.

But I kept at it and even found extra cash to invest.

Seven years later I’m so glad I did. That money is now worth a small fortune!

Many think the stock market is due for a drop soon. No one knows when it will happen, but if it does, keep the faith. Market drops are often the time to buy if you have at least a 10-year time horizon.

#6. Marry well

You can make all the great money moves in the world, but if you’re married to someone who makes all the wrong moves you’re in trouble.

You don’t have to marry Suze Orman or Dave Ramsey, but you do need a spouse who shares your financial goals and general outlook on money.

This was a VERY big part of our financial success.

I was good at tips #1, #2, and #5 above, but my wife was great at #3 and #4. In words from The Millionaire Next Door, I was good at offense and she was good at defense.

Together we had a winning combination. We knew what we wanted to accomplish, divided up the responsibilities, and climbed up the money mountain together.

#7. Have goals and a plan to reach them

First of all, having a goal is key to being financially successful. It sets the bar and allows you to work towards what you want to achieve.

It doesn’t need to be a 100-page treatise comparable to the federal budget, but you must have at least a general goal like “retire at 40 with $2 million in the bank.” It’s better yet to have SMART goals.

Another key is to write them down. Research has shown that “people become 42% more likely to achieve their goals and dreams, simply by writing them down on a regular basis.”

Second, simply having a goal does little good if you don’t then take action on reaching these goals.

You need to break each goal into bite-sized tasks that allow you to grow your career and control your spending if you want to accumulate wealth.

I know this can seem daunting, but it doesn’t need to be. Simply write down what you want to accomplish and what you’re going to do to get you there. Then just make a small bit of progress every day. Over time, those seemingly little advances will add up to something big.

This was the tip that I missed when I was young. I went several years without a specific money plan and I lost five years of investing. Do you know what those five years would be worth now? Thousands.

But hopefully my bad planning demonstrates that even if you’ve made a few mistakes along the way, there’s hope for you if you take action now.

#8. Track net worth and cash flow

Net worth and cash flow statements are financial success scorecards. Net worth (assets less liabilities) tells you how you are growing your wealth over time, and is of course something that J$ likes to drill into our heads.

Cash flow statements (aka “budgets” listing income less expenses) tell you how much you are making and how it’s being spent. From there, you can make decisions that allow you to do more of the former and less of the latter, freeing up more money for investing.

We have tracked our net worth monthly for over 20 years. We use Quicken, but you can also use Mint, Personal Capital, a spreadsheet, or even paper. The key is that you track it on a regular basis (probably at least quarterly) to see how you’re doing at growing your wealth. It lets you know if what you’re doing is working or not. (Editor’s Note: I’m on month #114 in a row – best thing I ever did for my money!!!)

We have had a budget for years as well. We use a spreadsheet that I update monthly. It’s very useful at showing where our money is spent which allows us to make adjustments sooner rather than later.

Many people hate budgets because they think they are too restrictive. I’ve found them to be the opposite. They allow me to know exactly what I’m earning and spending, which then frees me to make the lifestyle decisions I want to make.

My guess is that our budget alone was responsible for half of our spending control success.

#9. Develop side hustles

In addition to growing your career, a side hustle/business is a great way to #1) do something you enjoy and #2) bring in some extra income to grow your net worth much faster. Also something J$ loves to share here. (See: 71 Ways to Make Money On The Side)

I’ve had several side hustles over the years including:

  • Freelance writing for magazines — This was a major contributor to paying off our mortgage
  • Blogging — I had a blog before my current one which was quite successful
  • Refereeing — Mostly done because my son needed the money and we did it together, but a few extra thousand dollars a year never hurts
  • Real estate — My biggest side business of all (though some could call it an investment) which allowed me to retire without having to draw down any assets

The great thing about a side hustle is that it speeds up early retirement dramatically.

Assume you can retire when you are able to generate $40k in income per year. At a 4% asset withdrawal rate, this means you’d need $1 million saved. Also assume you can invest $10,000 a year towards that goal at an 8% return.

If you have no side hustle, it would take you 29 years to reach your goal.

If you have a side hustle that took four years to build up to $20k per year, and you invested that money, in 12 years you’d have $503k (which would generate just over $20k at 4% withdrawal) plus a business that generated $20k. Bam! You’re at your $40k annual goal.

So the side hustle is probably worth it to save 17 years of working, right?

#10. Learn about money and manage it yourself

No one cares more about you than you do, but there are plenty of people who care about your money. Many of them want to turn it into their money and they are quite good at it.

Others have good intentions but simply don’t understand how money works. And yes, this includes many, if not most, financial advisors. The only way to avoid being taken (one way or the other) is to know the basics of managing money yourself.

Fortunately, the money principles you need to be successful are simple to learn and few in number. With a handful of books and regular reading of some good money blogs you will develop the knowledge and skill not only to protect yourself, but to thrive financially.

We were fortunate to take a Dave Ramsey-like class at our church soon after we were married. It set up a good foundation for us. I continued by reading several personal finance books and applying the key principles that I learned. Finally, I began to write about money and became even more educated along the way.

I started from ground zero, and if I can learn how to manage my money, you certainly can too.

Everything you need to know

Yes, there are a ton of other financial guidelines you could implement — probably thousands. But if you want the biggest financial bang for the time spent, focus on these ten wins above.

If you get these right, there’s no way for you not to become financially free yourself.

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This post comes to you from from ESI Money, a blog about achieving financial independence through earning, saving, and investing (ESI). It’s written by an early 50’s retiree who achieved financial independence, shares what’s worked for him, and details how others can implement those successes in their lives. He is also the author of a free ebook titled Three Steps to Financial Independence.

Ten Moves That Will Skyrocket Your Net Worth syndicated from http://ift.tt/2rLcJKu

5 Best Credit Cards For College Students In 2017

5 Best Credit Cards For College Students

As a college student, your first credit card will be the first brick you lay in foundation of building your credit history and securing a high credit score. Without getting too dramatic, many life decisions will be determined by your credit score.

Your credit score will be used to determine your eligibility for renting an apartment, buying a house, securing loans, and even used during background checks for employment.

Don’t let the risk of credit card abuse scare you off – credit cards also have benefits– you can earn rewards and build your credit. In the short term, your credit score will help you be eligible for increased credit limits, earn rewards, and spend wisely in your daily life.

Students and adults alike have been swept away in the world of credit cards by living beyond their means, and some of the most common student credit card mistakes leave students with thousands of dollars in credit card debt.

Still, most students (and their parents) know that it is impossible to begin establishing a positive credit history without establishing some form of credit. For most parents and students, learning to use credit cards responsibly has not only become a priority, but also a necessity.

When considering your first credit card, you will want to ask yourself the following questions:

  • Does it offer rewards or cash back incentives? How do you cash in on those rewards?
  • Are there annual fees or membership fees? If so, can I avoid those fees? 
  • What is the APR? Do they have an introductory APR? A penalty APR for late payments?
  • Does the credit card offer allow for balance transfers?

Once you look at your options, apply for the card that is geared towards new borrowers who are building their credit.

Below, we have compiled a list of the best credit cards fur students:​

​1. BankAmericard Cash Rewards for Students

Features​:

  • APR: 13.24% – 23.24% variable
  • No annual fee
  • Penalty APR 29.99%
  • $100 online cash rewards bonus after you spend at least $500 on purchases in the first 90 days of opening an account
  • 3% cash back on gas, and 2% cash back at grocery stores on up to $2,500 in grocery/wholesale club/gas quarterly spend
  • No foreigh transaction fees
  • 10% customer bonus every time you redeem your cash back into a Bank of America checking or savings account
5 Best Credit Cards For College Students

The Bank Americard Cash Rewards card offers higher cash reward options for regular expenses such as gas and groceries. There is a sign up bonus if you meet the $500 purchase requirement, and you continue to get more bonuses if you have a Bank of America checking or savings account).

2. Discover​

Discover offers student friendly options for both secured (Discover it Secured) and unsecured cards (Discover it Chrome). What is a secured card, you ask?

Secured cards are credit cards that require a refundable security deposit before an account can be opened.

5 Best Credit Cards For College Students

The amount you deposit into the account becomes the dollar amount of your line of credit.

Remember that Discover is not as widely accepted as Visa or Mastercard, so keep that in mind if you are travelling abroad. Also, you have to activate the bonus cash-back categories every quarter.

First, let’s take a look at the Discover It Chrome for Students card.

Discover It Chrome For Students

Features​:

  • 0% intro APR on purchases for 6 months, then the standard variable purchase APR of 13.74% – 22.74%
  • No late fee on first late payment. No penalty APR for paying late
  • No annual fee
  • 2% cash back at restaurants and gas stations on up to $1,000 in combined purchases each quarter; 1% cash back on all other purchases
  • Security deposit of $200 or more will establish the credit line (up to the amount they can approve)
  • Monthly reviews to evaluate transitioning the account to a “no security deposit required” account
  • FICO score free on monthly statements
  • Dollar for dollar match on all cash back earned at the end of your first year
  • Good Grade Rewards: $20 cash back each school year if your GPA is 3.0 or higher for up the the next 5 years

Discover It (Secured Card)

The “Discover it” Secured card is exactly what the name suggests- a secured credit card. Why should I get a secured credit card when I could get a regular student credit card? There are advantages such as cash back and dollar for dollar match on all cash back earned during the year. It is also a good option if you have damaged credit. If you maintain good credit history by paying on time and using your card responsibly, you could be eligible for an account without a security deposit.

Features​:

  • No annual fee
  • 2% cash back at restaurants and gas stations on up to $1,000 in combined purchases each quarter; 1% cash back on all other purchases
  • Security deposit of $200 or more will establish the credit line (up to the amount they can approve)
  • Monthly reviews to evaluate transitioning the account with no security deposit
  • FICO score free on monthly statements
  • Dollar for dollar match on all cash back earned at the end of your first year
  • No penalty APR
  • No foreign transaction fees

Because the Discover It card is a secured credit card, it offers a quick solution for students with damaged credit (usually from co-signing with another borrower, or a parent borrowing on your behalf). All you have to do is prove your identity, and prove you do not have any pending bankruptcy proceedings.

It is important to remember that a secured credit card is different from a prepaid debit or credit card. For instance, you cannot build credit with a prepaid credit card or a debit card. This is a great card for students who want to take advantage of the substantial rewards but are not eligible for an unsecured credit card.

Discover It (secured) offers virtually the same features as Discover It Chrome, with the exception of the feature of additional cash back for students who maintain good grades.

3. Citi ThankYou Preferred Card For College Students

Features:​

  • No annual fee
  • 0% Intro APR on purchases for 7 months; afterwards a variable APR will be 14.74% – 24.74%, based on credit worthiness
  • Earn 2,500 bonus ThankYou Points after spending $500 within the first 3 months of card membership
  • 2 ThankYou Points per dollar spent on purchases for dining restaurants and entertainment, 1 ThankYou Point on purchases
  • ThankYou points rollover, are unlimited, and can be redeemed for Point are redeemable for $25 in gift cards and items from the points collection
  • Purchase protection benefits for repairs, refunds, and damaged and stolen items
  • Price Rewind Service will refund the difference if a lower price on a registered item within 60 days of purchase
Citi ThankYou Preferred Card For College Students

This is an ideal card for students who dine out frequently and have entertainment expenses. Citi uses a “ThankYou Points” system instead of offering cash back, which is generally a better option. Since one point is equivalent to once cent, it will take many points to reap the rewards of this program.

Penalty interest rates can add up quickly, which is another reason to make sure you pay on time. This card has a penalty interest rate of a penalty interest rate of 29.99% and a foreign transaction fee of 3%.

4. Capital One Journey Student Rewards Cards

Features:​

  • 20.74 APR (no introductory APR)
  • Penalty APR for late payments
  • No annual fee
  • No foreign transaction fees
  • Earn 1% cash back on all your purchases; 1.25% after making payments on time
  • Late payment fee of $35
  • Cash advances cost the greater of $10 or 3%
  • Capital One Credit Tracker
Capital One Journey Student Rewards Cards

The Capital One Journey Student Rewards card is a good card for students with average credit, but they do not offer balance transfers.

If you make your minimum payments on time, you get a 0.25% cash back bonus on all purchases made during the corresponding billing period. You can redeem your rewards as a statement credit or check in $25 increments.

After five months of on time payments, you get an automatic credit line increase. They also offer the Capital One Credit Tracker feature, which provides you insight about your credit report.

The Capital One Credit Tracker feature gives you free, unlimited access to your FICO credit score as well as a simulator for hypothetical situations that could impact your credit.

​Check It Out Here.

5. Wells Fargo Cash Back College Card

Features​:

  • APR 0% for 6 months, 11.90% to 21.90% thereafter based on credit
  • Free access to Wells Fargo Online credit education and tools
  • No annual fee
  • 3% cash rewards on gas, grocery, drugstore for first 6 months, 1% cash rewards on virtually all other net purchases
5 Best Credit Cards For College Students

The Wells Fargo Cash Back College card helps new borrowers build credit and buy what they need while earning rewards.

The 3% cash rewards on your basic necessities is a huge bonus in this category. Also, Wells Fargo has locations inside of many grocery stores for convenience.

The Final Verdict​

The Discover It Chrome card comes the closest to being the “full package”, with an intro 0% APR, substantial rewards, credit tools, and no penalty APRs. The only downside is that Discover is not accepted everywhere. The Wells Fargo Cash Back College Card comes in second as it offers an introductory APR and consistent cash rewards for basic necessity purchases. Bank of America also has a solid rewards program.

Regardless of the credit card you choose, be sure to use your card wisely. Ideally, you will want to pay off your credit card balance each month so that you avoid accumulating unnecessary debt that could hurt you in the long run.

Be careful of 0% APR offers, since late payments can cause a penalty APR to kick in, sometimes as high as 29%.

Monitor and Control Your Credit Score Regularly

If you fall behind on your payments or get late fees, try to resolve it as soon as possible. There are many ways to improve your credit score to avoid negatively impacting your credit, so make these changes sooner rather than later.

Learn how to avoid some of the biggest mistakes you can make with your credit cards and fix them before they impact your credit card score.

For more, check out our full list of the best credit cards for students.​

Have you ever used any of these credit cards before? Which one is your favorite?​

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Lifestyles of The Rich and Frugal

DIY ceiling

[As part of our new weekly column by Mr. 1500 of 1500Days.com]

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The most frugal times of my life were my college years. While my apartment rent was paid with loans, I had to come up with money for everything else. To support myself, I worked for minimum wage ($4.25/hour) at a computer lab. This income had to pay the utility bills and everything else. I kept the air conditioning off.

Another casualty of low income was a healthy diet. Dinners during those years consisted almost entirely of spaghetti. I’d make a huge bowl of noodles on Sunday evening and store them in a big plastic container. I’d reheat them along with some cheap spaghetti sauce for dinner almost Every. Single. Night. Breakfast was cold cereal and lunch was a peanut butter and jelly sandwich. I ate for under $20 per week. My poor diet must have scarred me because the very first thing I bought when I received my first paycheck from real work was a pound of ground beef.

Life is better now. Through a lot of hard work and diligent saving, my net worth is about $1,800,000. While I don’t eat spaghetti every night, I still retain my frugal ways with rare exception. I’m careful with my dollars, I have a modest home, and I don’t eat out often and am not afraid to clip coupons.

However, I recently spent time with someone who is younger, far better off and maybe even more frugal than I…

Calling Doctor Frugal

Near the top of the Rockstar Finance Net Worth Tracker sits the Physician on FIRE (I’m calling him PoF from here on out):

PoF is an anesthesiologist who makes a healthy income. According to one of his recent posts, the average pay for his specialty is $350,000:

PoF happens to live in a red county, so his pay probably exceeds $400,000 (about four times more than the average American household). Despite the big income, he’s not a big spender. The PoF family went through $62,000 in 2016, less than $63,784 that the average American family plowed through in 2013.

Lifestyles of the Rich and Frugal

On a recent vacation, I visited the PoF and his family and was eager to see how they lived. Any time the conversation turned to money or I noticed something related to dollar signs, I made a mental note. Here are some of my favorite observations:

Home: PoF lives in a modest space in a 1950s subdivision. The house is tastefully decorated with mid-century modern furnishings, right down to the dishes and silverware. All of it could have been purchased at expensive antique stores or through auctions. However, the PoF family bought it here and there, piecemeal from thrift stores, Craigslist and garage sales.

The picture at the top of this post is a custom ceiling in a screened-in room at the PoF house. When I asked PoF about it, he said this:

I found the old wood flooring on Craigslist and thought it would make a neat ceiling. I stuffed it into my car and nailed it up myself.

While PoF’s home is 3600 square feet (equally divided between above ground and basement), it cost less than PoF makes in a year. And PoF ‘s vacation home set him back just $15,400.

Grocery shopping (PoF’s wife speaking here):

We shop at Aldi. They have the best fruits and vegetables.

Aldi is a discount grocery chain in the United States. No Whole Foods here!

Vehicles: PoF’s wife drives a modest minivan and he sports an HHR with over 100,000 miles on the odometer:

Bicycles: PoF has a load of bicycles in his garage. While they are nice bikes, they aren’t made out of carbon fiber or exotic metals. He bought most of them used:

I picked up my road bike and these two mountain bikes on Craigslist.

Going out to eat (or not): The PoF and I sampled beers at local microbreweries, but we never went out to eat. A couple of our outings overlapped lunch and we simply packed sandwiches.

And when PoF and his family do go out to eat, they don’t visit high-end steakhouses. Before I departed, I asked PoF for advice about a town that we were stopping at:

Yeah, we’ve stopped off at the Arby’s there for lunch a couple of times…

Vacations: I asked PoF his opinion on signing up for a hotel credit card. I’m going to New York and this card would get me two free nights in a super swanky hotel that would set me back $1,600 otherwise. I told PoF that I’m not really comfortable staying in fancy places like that and he said this:

I don’t like it either. I can open my own doors and carry my own bags.

The PoF family isn’t cheap. Cheap is serving guests Spaghettios, using generic toilet paper (just don’t do it) and tipping poorly. I ate very well at the PoF household and the toilet paper was plush, just how I like it. PoF tipped generously on our microbrew expeditions.

Deprivation or Optimization?

I get into arguments with spendy people frequently:

Why don’t you just treat yourself?

Just buy it!

And my personal favorite (is the sarcasm coming through?):

I could never live your life of deprivation.

The PoF family isn’t deprived in any way. They’ve been to Iceland and recently went on a cruise. PoF’s children have loads of Lego ($$$$$). PoF’s beer making operation is sophisticated and his refrigerator contained many fancy brews.

They spend money on what matters to them and save when it doesn’t. Cars don’t make them happy, so the HHR is all they need. Neither does a big home or designer clothes.

The PoF family has realized that stuff doesn’t bring happiness. Money isn’t an issue when you have a net worth north of $3,000,000, but that isn’t the only cost of stuff. Managing stuff requires your time. Accumulate enough stuff and it owns you.

PoF and his family have optimized their lives for what is important to them. They live minimally and with intention. They optimize their spending and more importantly, optimize their time.

Be Like Dr. Frugal

It’s easy to be frugal when you have no money. Frugality by choice is much more interesting. People like PoF have life figured out. He knows what matters and if it costs money, he spends it. However, figuring out what matters is the true hard part, and it looks like PoF has succeeded.

You may not be able to earn like the PoF family, but you can certainly live like them. I recommend that you do!

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10 Ways To Kick Off Your Debt Pay-Off Plan

Are you tackling your debt in the upcoming year? If so, here are ten fantastic ways you can kick off your debt pay-off plan and start the New Year with a bang.Do you ever look at your mounting debt, and simply not know where to start? Are you waiting for some kind of epiphany or kick in the butt to get started? Do you simply feel paralyzed in even taking the first step because you feel like you’ve made too many mistakes already getting to this point?

Instead of waiting any longer, it’s always a good idea to jumpstart your debt payoff goal as soon as possible. Once you build up some momentum, you’ll be pretty hard to stop! For a lot of you that means paying down a significant portion of your student loan debt, or maybe even tackling your credit card debt.

Here are ten ideas for getting your debt payoff goal off the ground. Some of these are small actions, some are bigger. The important thing is that you just start.

Sell The Stuff You Don’t Need Anymore

Never underestimate the power of selling the stuff that you no longer need. Just because you think you might be holding onto a pile of junk doesn’t mean everyone else will. One man’s trash is another man’s treasure!

Go through your belongings and sell everything you don’t want, need, or use. I personally love selling on Facebook Yardsales. Stuff sells so quickly and for a lot more than you would think!

If you don’t know where to start, look at my story of selling on eBay and Amazon on the side.

Cash In Your Change

If you’ve been collecting change in a jar all year use it for something amazing – paying off debt!

Take it to the bank, cash it in, and apply it to your debts.

Important note here: take it directly to the bank. Don’t use one of those machines in the grocery store to count it for you because they take a cut of your money. The bank won’t do that. They will accept the full amount you bring in to deposit.

If you’re worried about your bank, consider one of these banks that offer free checking accounts.

Ignore Raises And Overtime

Do you get paid overtime a lot? Do you have a raise coming up in the near future? If so, don’t spend that extra cash.

You’re already used to living on your current salary so don’t give in to lifestyle inflation. Put all of your overtime pay and raises straight to your debt’s principal.

The same is true for any raises you get. Simply put the additional amount you get in your paycheck each month into your debt.

Start A Side Hustle

What can you do for a little extra cash? Clean houses? Babysit? Walk dogs? I was riding in an Uber the other day and my driver was a teacher. She simply drove everyday after school got out, for about 4-5 hours each day (from about 3pm to 8pm). She told me that she earns about $3,000 per month, and uses that money to pay down her student loan debt.

Even if you only set a goal to earn an extra $20 per week that will accumulate to $1,000 per year. Those small amounts count.

I’m a big believer that anyone can earn an extra $100 per month if they really try. In fact, I’ve yet to meet someone whose failed at that challenge when I really dug in and broke down their time, money, income, etc.

Increase Your Debt Payments By A Percentage Every Month

How much do you pay on your debt now? Is it possible for you to increase that payment by 1-5% every month?

By slowly increasing the amount you pay you’ll be less likely to notice that you’re living on less money. And once again, all these small amounts can add up to something amazing.

That sounds scary, but let’s take a small example of just 1% additional each month. If you’re paying $100 towards your debt, increasing that amount by 1% means your payment will only go up to $101 the next month. Don’t tell me you can’t afford $1 more?!?!

It might not seem like it makes a difference (what’s $1 really going to do?), but doing this every month will start to make a big difference over time.

Lower One Big Payment

Are you paying an insane amount of money for a car or house? What if you sacrificed for a year and downgraded your current situation.

All the extra money could then be funneled toward paying down debt and once you’ve gotten your goal accomplished you could go back to living the lifestyle you want. (It will feel so much better when you’re debt free!)

One of the ways that we did this was by selling our car and going to a one car family. Now, we only have one car and I take Uber anywhere I need to go beyond that. It saves us over $200 per month in expenses.

Lower All of Your Recurring Expenses

There’s always a way to lower recurring expenses like internet, cell phone, TV, and insurance. Take one day and try and lower these expenses. Negotiate with your current carriers or switch companies altogether.

Then put your savings straight to debt.

If you don’t know where you could cut some of your recurring expenses, look at a free tool called Ask Trim. It’s a great way to look at your recurring expenses and see where you can cut.

Have A No Spend Month

If you want to accumulate a bunch of money to throw at your debt by the end of the year then have a no-spend month, starting today.

A No-Spend month is when you try not to spend any money other than regular bills like rent and utilities. You’re forced to get creative and depending on your monthly spending level the savings can be HUGE.

If you don’t think it’s possible, check out these great tips for having a no-spend month.

Cancel Something

There’s most likely something that you’re subscribed to that you don’t really need or use. Cancel it!

Take the money you were paying and instead put it toward your debt. Even an extra $10 a month matters.

Some of the things we’ve cancelled over the last several years include:

Challenge Yourself To Execute Your Debt Pay-Off Plan

A great way to stay on top of your goal and make amazing progress while still feeling good about it is to challenge yourself.

Make it a game. Set monthly and quarterly goals for yourself and try to beat them. This will keep paying off debt fun instead of daunting. If you change your mindset you’ll be able to move mountains.

Here are some great ideas to make paying down your debt a game.

Final Thoughts

Every one of us is different, and we’ll each have our own debt pay-off plan. Hopefully some of these ideas stick with you and you can use them to achieve your own goals.

One thing we didn’t mention above, but it’s important to note, is accountability. Find someone to hold you accountable to your goals. It can be as simple as posting a comment below and sharing with us what you’re doing. We’d love to know!

What ideas do you have for someone looking to kick off their debt pay-off plan?

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