When summer vacation begins, classroom learning ends for most students. Even so, summer doesn’t have to mean a complete break from learning. Students starting summer jobs have the opportunity to learn some important life lessons. Summer jobs offer students the opportunity to learn about the working world – and taxes.
Here are six things about summer jobs that the IRS wants students to know.
As a new employee, you’ll need to fill out a Form W-4, Employee’s Withholding Allowance Certificate. Employers use this form to figure how much federal income tax to withhold from workers’ paychecks. It is important to complete your W-4 form correctly so your employer withholds the right amount of taxes. You can use the IRS Withholding Calculator tool at IRS.gov to help you fill out the form.
If you’ll receive tips as part of your income, remember that all tips you receive are taxable. Keep a daily log to record your tips. If you receive $20 or more in cash tips in any one month, you must report your tips for that month to your employer.
Maybe you’ll earn money doing odd jobs this summer. If so, keep in mind that earnings you receive from self-employment are subject to income tax. Self-employment can include pay you get from jobs like baby-sitting and lawn mowing.
You may not earn enough money from your summer job to owe income tax, but you will probably have to pay Social Security and Medicare taxes. Your employer usually must withhold these taxes from your paycheck. Or, if you’re self-employed, you may have to pay self-employment taxes. Your payment of these taxes contributes to your coverage under the Social Security system.
If you’re in ROTC, your active duty pay, such as pay received during summer camp, is taxable. However, the food and lodging allowances you receive in advanced training are not.
If you’re a newspaper carrier or distributor, special rules apply to your income. Whatever your age, you are treated as self-employed for federal tax purposes if:
You are in the business of delivering newspapers.
Substantially all your pay for these services directly relates to sales rather than to the number of hours worked.
You work under a written contract that states the employer will not treat you as an employee for federal tax purposes.
If you do not meet these conditions and you are under age 18, then you are usually exempt from Social Security and Medicare tax.
Visit IRS.gov, the official IRS website, for more information about income tax withholding and employment taxes.
Monday, May 20, 2013
Monday, April 1, 2013
Avoid Money Mistakes! 3 Nasty Credit Card Marketing Traps
We meet with students who fall victim to credit card mistakes and end up wasting lots of money. Don't be one of them!
As you consider signing up for some new plastic, watch out for these credit card marketing traps:
No. 1: A promise of a low APR
In order to get you to apply for a card, issuers use large, bold type proclaiming the lowest possible annual percentage rate offered by the account terms. That rate can often be as low as 9.99%, but you need to be aware that not everyone qualifies for it. Indeed, the lowest rate is reserved only for those with the best credit scores.
Look on the back of the credit card application you're considering. You should find a list of fees and interest policies there. The smaller print could show an interest rate as high as 20.99%. That means that, instead of getting the low interest rate in the big type, you could end up with a much higher rate, depending on your credit situation.
Even if you do qualify for the low APR, the rate may not be fixed. Look for the language that indicates that the rate is variable, changing with "market conditions." If so, that rate could easily go up later. Of course, the best way to avoid the rate trap is to pay off your balance each month. Then it won't matter what the interest rate is.
No. 2: A generous rewards program
Credit card issuers like to market rewards programs to potential account holders. They might offer "up to 5% cash back" or what seems like an insane amount of bonus airline miles when you sign up.
On rewards cards, you need to make sure you understand the program. In some cases, you receive that 5% cash back only on rotating categories. Other credit card rewards programs require you to meet a certain threshold. One card even requires you to spend $3,000 each year in order to get access to the 1% cash back on your purchases. And don't forget to check for caps on the rewards you can earn.
Be wary, too, of promises of 40,000 or 50,000 airline miles when you sign up for a credit card. While that number may sound like a lot, remember that miles (and "points") don't directly translate into large rewards. It can take all those bonus miles just to "pay" for a single round-trip ticket -- and you may face blackout dates and other restrictions.
Before you sign up for a credit card just for the rewards program, assess the situation and the true value of the rewards. Often, your best bet is a straightforward unlimited cash-back program. Take full advantage of the card by using it for everyday purchases, then paying off the balance in full each month.
No. 3: A 0% APR balance transfer
A balance transfer can be a great way to pay off debt at a faster rate, but you need to be cautious with such offers. First of all, you might not be approved for a high enough limit to consolidate your credit card debt. Second, what the credit card issuer's marketing materials don't highlight is the balance transfer fee.
Somewhere on the application (probably on the back, likely in small print next to an asterisk), the credit card issuer will reveal its balance transfer fee. It's likely to be 3% or 5% of the balance you transfer. Under these terms, if you transfer $5,000, you would pay a fee of $150 (3%) to $250 (5%). Of course, if your current credit card has a high enough interest rate, you could still come out ahead by paying the balance transfer fee. But you should be aware of the cost, so you can decide whether a balance transfer would make financial sense.
You also need a plan to pay off the balance before the regular interest rate kicks in. Check the length of the introductory period. The balance transfer offer might extend the 0% rate for only six months. Look for a longer period if you have a higher balance or need the extra time. Remember that your interest rate will jump at the end of the period, so be sure to pay off your balance by then (even if the credit card issuer hopes you won't). And don't miss a payment or pay late: Your 0% rate offer becomes void if you make one of those mistakes.
Before you apply for a 0% APR balance transfer, be sure you've crafted a plan that works for you. To give yourself a cushion, try to arrange your finances so you've paid off the balance before the end of the introductory period.
A new credit card can be a great way to take advantage of new opportunities. But don't let marketing gimmicks blind you to the fact that the credit card issuer is betting against you being financially savvy.
Source: http://money.msn.com/credit-cards/3-nasty-credit-card-marketing-traps
No. 1: A promise of a low APR
In order to get you to apply for a card, issuers use large, bold type proclaiming the lowest possible annual percentage rate offered by the account terms. That rate can often be as low as 9.99%, but you need to be aware that not everyone qualifies for it. Indeed, the lowest rate is reserved only for those with the best credit scores.
Look on the back of the credit card application you're considering. You should find a list of fees and interest policies there. The smaller print could show an interest rate as high as 20.99%. That means that, instead of getting the low interest rate in the big type, you could end up with a much higher rate, depending on your credit situation.
Even if you do qualify for the low APR, the rate may not be fixed. Look for the language that indicates that the rate is variable, changing with "market conditions." If so, that rate could easily go up later. Of course, the best way to avoid the rate trap is to pay off your balance each month. Then it won't matter what the interest rate is.
No. 2: A generous rewards program
Credit card issuers like to market rewards programs to potential account holders. They might offer "up to 5% cash back" or what seems like an insane amount of bonus airline miles when you sign up.
On rewards cards, you need to make sure you understand the program. In some cases, you receive that 5% cash back only on rotating categories. Other credit card rewards programs require you to meet a certain threshold. One card even requires you to spend $3,000 each year in order to get access to the 1% cash back on your purchases. And don't forget to check for caps on the rewards you can earn.
Be wary, too, of promises of 40,000 or 50,000 airline miles when you sign up for a credit card. While that number may sound like a lot, remember that miles (and "points") don't directly translate into large rewards. It can take all those bonus miles just to "pay" for a single round-trip ticket -- and you may face blackout dates and other restrictions.
Before you sign up for a credit card just for the rewards program, assess the situation and the true value of the rewards. Often, your best bet is a straightforward unlimited cash-back program. Take full advantage of the card by using it for everyday purchases, then paying off the balance in full each month.
No. 3: A 0% APR balance transfer
A balance transfer can be a great way to pay off debt at a faster rate, but you need to be cautious with such offers. First of all, you might not be approved for a high enough limit to consolidate your credit card debt. Second, what the credit card issuer's marketing materials don't highlight is the balance transfer fee.
Somewhere on the application (probably on the back, likely in small print next to an asterisk), the credit card issuer will reveal its balance transfer fee. It's likely to be 3% or 5% of the balance you transfer. Under these terms, if you transfer $5,000, you would pay a fee of $150 (3%) to $250 (5%). Of course, if your current credit card has a high enough interest rate, you could still come out ahead by paying the balance transfer fee. But you should be aware of the cost, so you can decide whether a balance transfer would make financial sense.
You also need a plan to pay off the balance before the regular interest rate kicks in. Check the length of the introductory period. The balance transfer offer might extend the 0% rate for only six months. Look for a longer period if you have a higher balance or need the extra time. Remember that your interest rate will jump at the end of the period, so be sure to pay off your balance by then (even if the credit card issuer hopes you won't). And don't miss a payment or pay late: Your 0% rate offer becomes void if you make one of those mistakes.
Before you apply for a 0% APR balance transfer, be sure you've crafted a plan that works for you. To give yourself a cushion, try to arrange your finances so you've paid off the balance before the end of the introductory period.
A new credit card can be a great way to take advantage of new opportunities. But don't let marketing gimmicks blind you to the fact that the credit card issuer is betting against you being financially savvy.
Source: http://money.msn.com/credit-cards/3-nasty-credit-card-marketing-traps
Wednesday, March 27, 2013
Pay Back Debt! Small Cities in the U.S. Paying Off Student Loan Debt for Residents
Would you move if it meant someone else would pay off your student loan debt? So would we.
It turns out, several smaller cities in the United States are offering just that. They’re encouraging young graduates to move to their cities and hold steady jobs, and in exchange, the city will help pay down their student loan debt.
According to ABC News, Niagara Falls, New York is the latest city to jump on the bandwagon.
The idea is the brainchild of Seth Piccirillo, Niagara Falls’ new director of community development. In an interview with ABC News, Piccirillo states, “We’ve lost a lot of talent, a lot of brain power…For 50 years we’ve been asking ourselves: how do we keep our young people? …Having young professionals is the key to a modern economy.”
ABC News reports that graduates who have earned a 2- or 4-year degree and live in an apartment or buy a home in a designated area of Niagara Falls will qualify for $3,500 a year in student loan payments from the city for a maximum of two years.
Piccirillo and the city of Niagara Falls will first target graduates of Niagara University and Niagara County Community College, but that eventually, they will open up the opportunity to graduates from all over the country.
Niagara Falls isn’t the first city to offer this type of incentive, and they won’t be the last, either. According to ABC News, 50 counties in Kansas offer Associate’s, Bachelor’s or Post-Graduate degree holders the option to take tax waivers for up to five years and/or student loan payments for up to $15,000. All you have to do is establish residency in one of the counties.
ABC News reports that a few other areas in the country are offering or considering offering similar incentives. They include:
Source: http://www.fastweb.com/student-life/articles/3582-small-cities-in-the-us-paying-off-student-loan-debt-for-residents?from_session=true
It turns out, several smaller cities in the United States are offering just that. They’re encouraging young graduates to move to their cities and hold steady jobs, and in exchange, the city will help pay down their student loan debt.
According to ABC News, Niagara Falls, New York is the latest city to jump on the bandwagon.
The idea is the brainchild of Seth Piccirillo, Niagara Falls’ new director of community development. In an interview with ABC News, Piccirillo states, “We’ve lost a lot of talent, a lot of brain power…For 50 years we’ve been asking ourselves: how do we keep our young people? …Having young professionals is the key to a modern economy.”
ABC News reports that graduates who have earned a 2- or 4-year degree and live in an apartment or buy a home in a designated area of Niagara Falls will qualify for $3,500 a year in student loan payments from the city for a maximum of two years.
Piccirillo and the city of Niagara Falls will first target graduates of Niagara University and Niagara County Community College, but that eventually, they will open up the opportunity to graduates from all over the country.
Niagara Falls isn’t the first city to offer this type of incentive, and they won’t be the last, either. According to ABC News, 50 counties in Kansas offer Associate’s, Bachelor’s or Post-Graduate degree holders the option to take tax waivers for up to five years and/or student loan payments for up to $15,000. All you have to do is establish residency in one of the counties.
ABC News reports that a few other areas in the country are offering or considering offering similar incentives. They include:
- Neighborhoods in Detroit
- Columbia City neighborhood of southeast Seattle
- Nebraska, which is considering a setup similar to Kansas’
Source: http://www.fastweb.com/student-life/articles/3582-small-cities-in-the-us-paying-off-student-loan-debt-for-residents?from_session=true
Monday, March 25, 2013
Be Inspired! How I Afforded My Dream Trip to Paris
By Sadia Latifi
In my house, family vacations were a big deal.
Growing up, we took two big trips each year, one in the summer and one during winter break. If the trip was on this continent, we’d head in the family van and drive across the country. My dad theorized that we’d save money and see more along the way. Occasionally, we’d splurge to visit Pakistan or Sweden, where some of my family lives.
These trips, though sometimes exhausting, made a huge impression on me and cemented an early love of travel.
Last fall, I decided I wanted to go to Paris. One of my good friends from college was in her final year of graduate studies in Bordeaux and knew fluent French, so it seemed like the perfect opportunity.
I just needed the money to get there.
My Family Didn’t Instill a Love of Budgeting …
My parents were responsible with their retirement funds and life insurance but would overspend with plastic when they really wanted something. I was acutely aware of some of my parents’ habits, and was determined to do better when I grew up.
On the whole, I’d categorize my financial status as “ignorant.”
Three years out of college, I was slowly paying off a five-figure student loan but at least I didn’t have credit card debt. (My parents helped pay tuition and credit cards until I graduated, so that helped.)
Then I graduated, and started work. Even though I had a good job at an advertising agency in New York, I had residual emotional baggage from my previous stint as a low-paid regional reporter in North Carolina, making $35,000. When I switched to advertising, my salary bumped up by more than half.
I thought I’d be comfortable, but New York expenses made it difficult to feel like I ever had enough.
I also never really knew where my money went. I had signed up for a 401(k) through my job but couldn’t tell you how it worked. My budgeting consisted of depriving myself of things I wanted for as long as possible before indulging in a few major splurges every month, mostly because I never knew exactly how much money I had. I rarely went clothes shopping, but when I did, I would spend hundreds of dollars. Now I’m 24 (I’ll be 25 in August) and I’m starting to change the way I’m thinking about my money.
And all that started with this vacation.
My Paris Dream Would Require Real Planning
Between flights, hotel rooms and spending money, I wanted to save $2,000 to travel comfortably in France for eight days. I assumed around $800 for roundtrip airfare and around $100 a day for food (converting from euros). I was staying with my friend in Bordeaux for three days, so that would be free.
Instead of either a crowded hostel bunk bed or a luxury suite, I compromised for the remaining days I’d be there. I booked a small, lovely apartment in central Paris through Airbnb.com for me and my friend, and it cost $88 a night for four nights–divided by two. The rest of the money would be for things like museum admissions, metro tickets and shopping. I could’ve done the trip on much less but I wanted to be able to try nice bars and restaurants; I didn’t want to travel halfway around the world to deprive myself.
In researching budgeting tools online, I came across LearnVest and immediately enrolled in the Take Control Bootcamp. The bootcamp encouraged me to set long- and short-term goals for my income and savings, which got me thinking about the things that matter most to me: my values, my ideal future. It also made me think about what I’d regret not doing—like visiting the City of Light.
How I Got Myself to Paris
First, I created automated savings accounts for every goal I have (travel, education, emergencies, health expenses and eventually buying a home). Since the money is automatically deducted from my paycheck, I can’t miss what I’ve never seen.
I started by cutting back on unnecessary expenses. For example, I stopped getting manicures and pedicures in the winter, and I postponed getting a new phone until Black Friday.
But in order to make my travel dreams a reality, I really needed to earn more money.
At my annual review last November, I came with salary research and a list of my accomplishments on the job. I felt prepared and left satisfied. After a surprise promotion (and subsequent raise), I went back into my checking account and adjusted my budget and savings transfers accordingly.
I also started looking for side income. I began doing more freelance writing, editing and even started mystery shopping at restaurants (basically, dining out anonymously so I could report back and owners can learn more about customers’ experiences at their restaurants). Mystery shopping doesn’t really buoy my income much, but it’s a nice way to subsidize my monthly dining. I got into it by visiting the Mystery Shopping Providers Association website to search for opportunities in my area.
Between the raise and the side income, I ended up putting away $300 to $400 a month for Paris.
And, Finally …
All in all, it took me about six months to save for the trip—which I finally went on this April!
To avoid spending money I didn’t have, I didn’t book my flights or hotel rooms until there was enough money in my special travel account. I ended up exceeding my savings goal a bit and kept the rest in the account for travel later in the year.
My ten days in Paris and Bordeaux made all the hard work and budgeting sacrifices worth it.
Even though it rained the entire trip, the experience was incredible. I’m so glad to have stayed in an apartment right across from Notre Dame, instead of a cheap, rowdy hostel farther away. I climbed to the top of the Eiffel Tower, gawked at the Mona Lisa and walked across the Seine while French men shamelessly flirted with me. I spent hours upon hours giggling with one of my best friends and ate a ton of cheese.
And the best part? I didn’t have to worry about money a single time while I was there.
How My Vacation Changed Me for Good
And the added benefit was … saving up for this trip helped put all of my goals into focus. Throughout my life, there have been so many things I wanted to pursue but didn’t, either because I was afraid or because I thought they were silly or impossible.
When I was a kid I really wanted to learn an instrument. I also wanted to learn how to swim (yes, I don’t know how to swim). When I got older, I thought it would be really cool, and potentially useful for my career, to learn Arabic.
I made plenty of excuses: I was too busy with school or I didn’t have enough money. Arabic classes and music lessons would be time-consuming and expensive. I told myself that needed to save my money for more long-term, “serious” goals, like buying a home or saving for retirement.
That started to change when I began to picture the life I want and the person I want to become. I don’t know exactly what I’ll be doing in five years, but I do know I want to speak Arabic, and play the guitar, and I want to travel. While that sounds simple, it’s not exactly cheap.
I’ve resolved not to scrimp on little things (like depriving myself of everything I could for most of the month) or to spend on meaningless things (like my subsequent crash splurges when I can’t take the deprivation anymore). It means I’ve got to be a hustler, continually finding new ways to earn and save more. I’m resolved to earn more side income and continue to adjust my savings targets to match my ever-evolving priorities.
On to My Next Goals!
I’m currently signed up for an online Arabic course but won’t let myself sign up for guitar lessons until later in the year, when my education account replenishes itself. I want to do a lot of things, but I’ve resigned myself to not doing them all at once.
I haven’t started automatically deducting for health expenses since it’s not a pressing issue, thankfully, but I think I might want Lasik eventually, so I’m planning to start soon. Just the idea that I’ll be saving for a procedure like that makes me feel like I am finally taking care of myself.
Since I know I’ve got enough money going into savings because I’ve automated it, I also don’t feel as guilty spending what I do have in my checking account on a latte run or an occasional meal out.
I’ve also now paid off one of my three student loans. And, at 24, I’ve got five figures saved up in the bank for things that are important to me, like taking classes and owning a home someday.
Who knew saving for a dream vacation would lead to a whole new philosophy on budgeting for my dream life?
Source: http://www.learnvest.com/2012/06/how-i-saved-2000-for-my-dream-paris-vacation/
In my house, family vacations were a big deal.
Growing up, we took two big trips each year, one in the summer and one during winter break. If the trip was on this continent, we’d head in the family van and drive across the country. My dad theorized that we’d save money and see more along the way. Occasionally, we’d splurge to visit Pakistan or Sweden, where some of my family lives.
These trips, though sometimes exhausting, made a huge impression on me and cemented an early love of travel.
Last fall, I decided I wanted to go to Paris. One of my good friends from college was in her final year of graduate studies in Bordeaux and knew fluent French, so it seemed like the perfect opportunity.
I just needed the money to get there.
My Family Didn’t Instill a Love of Budgeting …
My parents were responsible with their retirement funds and life insurance but would overspend with plastic when they really wanted something. I was acutely aware of some of my parents’ habits, and was determined to do better when I grew up.
On the whole, I’d categorize my financial status as “ignorant.”
Three years out of college, I was slowly paying off a five-figure student loan but at least I didn’t have credit card debt. (My parents helped pay tuition and credit cards until I graduated, so that helped.)
Then I graduated, and started work. Even though I had a good job at an advertising agency in New York, I had residual emotional baggage from my previous stint as a low-paid regional reporter in North Carolina, making $35,000. When I switched to advertising, my salary bumped up by more than half.
I thought I’d be comfortable, but New York expenses made it difficult to feel like I ever had enough.
I also never really knew where my money went. I had signed up for a 401(k) through my job but couldn’t tell you how it worked. My budgeting consisted of depriving myself of things I wanted for as long as possible before indulging in a few major splurges every month, mostly because I never knew exactly how much money I had. I rarely went clothes shopping, but when I did, I would spend hundreds of dollars. Now I’m 24 (I’ll be 25 in August) and I’m starting to change the way I’m thinking about my money.
And all that started with this vacation.
My Paris Dream Would Require Real Planning
Between flights, hotel rooms and spending money, I wanted to save $2,000 to travel comfortably in France for eight days. I assumed around $800 for roundtrip airfare and around $100 a day for food (converting from euros). I was staying with my friend in Bordeaux for three days, so that would be free.
Instead of either a crowded hostel bunk bed or a luxury suite, I compromised for the remaining days I’d be there. I booked a small, lovely apartment in central Paris through Airbnb.com for me and my friend, and it cost $88 a night for four nights–divided by two. The rest of the money would be for things like museum admissions, metro tickets and shopping. I could’ve done the trip on much less but I wanted to be able to try nice bars and restaurants; I didn’t want to travel halfway around the world to deprive myself.
In researching budgeting tools online, I came across LearnVest and immediately enrolled in the Take Control Bootcamp. The bootcamp encouraged me to set long- and short-term goals for my income and savings, which got me thinking about the things that matter most to me: my values, my ideal future. It also made me think about what I’d regret not doing—like visiting the City of Light.
How I Got Myself to Paris
First, I created automated savings accounts for every goal I have (travel, education, emergencies, health expenses and eventually buying a home). Since the money is automatically deducted from my paycheck, I can’t miss what I’ve never seen.
I started by cutting back on unnecessary expenses. For example, I stopped getting manicures and pedicures in the winter, and I postponed getting a new phone until Black Friday.
But in order to make my travel dreams a reality, I really needed to earn more money.
At my annual review last November, I came with salary research and a list of my accomplishments on the job. I felt prepared and left satisfied. After a surprise promotion (and subsequent raise), I went back into my checking account and adjusted my budget and savings transfers accordingly.
I also started looking for side income. I began doing more freelance writing, editing and even started mystery shopping at restaurants (basically, dining out anonymously so I could report back and owners can learn more about customers’ experiences at their restaurants). Mystery shopping doesn’t really buoy my income much, but it’s a nice way to subsidize my monthly dining. I got into it by visiting the Mystery Shopping Providers Association website to search for opportunities in my area.
Between the raise and the side income, I ended up putting away $300 to $400 a month for Paris.
And, Finally …
All in all, it took me about six months to save for the trip—which I finally went on this April!
To avoid spending money I didn’t have, I didn’t book my flights or hotel rooms until there was enough money in my special travel account. I ended up exceeding my savings goal a bit and kept the rest in the account for travel later in the year.
My ten days in Paris and Bordeaux made all the hard work and budgeting sacrifices worth it.
Even though it rained the entire trip, the experience was incredible. I’m so glad to have stayed in an apartment right across from Notre Dame, instead of a cheap, rowdy hostel farther away. I climbed to the top of the Eiffel Tower, gawked at the Mona Lisa and walked across the Seine while French men shamelessly flirted with me. I spent hours upon hours giggling with one of my best friends and ate a ton of cheese.
And the best part? I didn’t have to worry about money a single time while I was there.
How My Vacation Changed Me for Good
And the added benefit was … saving up for this trip helped put all of my goals into focus. Throughout my life, there have been so many things I wanted to pursue but didn’t, either because I was afraid or because I thought they were silly or impossible.
When I was a kid I really wanted to learn an instrument. I also wanted to learn how to swim (yes, I don’t know how to swim). When I got older, I thought it would be really cool, and potentially useful for my career, to learn Arabic.
I made plenty of excuses: I was too busy with school or I didn’t have enough money. Arabic classes and music lessons would be time-consuming and expensive. I told myself that needed to save my money for more long-term, “serious” goals, like buying a home or saving for retirement.
That started to change when I began to picture the life I want and the person I want to become. I don’t know exactly what I’ll be doing in five years, but I do know I want to speak Arabic, and play the guitar, and I want to travel. While that sounds simple, it’s not exactly cheap.
I’ve resolved not to scrimp on little things (like depriving myself of everything I could for most of the month) or to spend on meaningless things (like my subsequent crash splurges when I can’t take the deprivation anymore). It means I’ve got to be a hustler, continually finding new ways to earn and save more. I’m resolved to earn more side income and continue to adjust my savings targets to match my ever-evolving priorities.
On to My Next Goals!
I’m currently signed up for an online Arabic course but won’t let myself sign up for guitar lessons until later in the year, when my education account replenishes itself. I want to do a lot of things, but I’ve resigned myself to not doing them all at once.
I haven’t started automatically deducting for health expenses since it’s not a pressing issue, thankfully, but I think I might want Lasik eventually, so I’m planning to start soon. Just the idea that I’ll be saving for a procedure like that makes me feel like I am finally taking care of myself.
Since I know I’ve got enough money going into savings because I’ve automated it, I also don’t feel as guilty spending what I do have in my checking account on a latte run or an occasional meal out.
I’ve also now paid off one of my three student loans. And, at 24, I’ve got five figures saved up in the bank for things that are important to me, like taking classes and owning a home someday.
Who knew saving for a dream vacation would lead to a whole new philosophy on budgeting for my dream life?
Source: http://www.learnvest.com/2012/06/how-i-saved-2000-for-my-dream-paris-vacation/
Monday, March 18, 2013
Pay Back Debt! About Income-Based Student Loan Repayment Plans
By Brian Wedge for The Chronicle
Everyone worries about deeply indebted college graduates with poor job prospects. Yet a program that helps those very borrowers, letting them repay their loans on the basis of how much they make, gets little attention.
For a few years now, the government has allowed borrowers whose federal student-loan debt is heavy relative to their income and family size to choose income-based repayment. In that program, they can make smaller monthly payments, and, if they meet certain conditions, the government even forgives their balances, eventually.
When the program began, in 2009, the timing seemed perfect. The economy had slumped, and student-debt levels were on the rise. Those concerns have only increased, but the program, despite its relevance, hasn't become a household word.
In June the White House announced plans to improve the income-based repayment program, acknowledging what experts on student loans already knew: "Too few responsible borrowers are aware of their repayment options."
Income-based repayment isn't for everyone. Most of the 37 million borrowers with outstanding federal student loans are well served by other plans. And not all loans are eligible for the program. It's best for borrowers who are hard pressed to make full standard payments because their student debt is high relative to their income. For example, a borrower with $30,000 in eligible federal loans with an interest rate of 6.8 percent would pay $345 a month under a standard 10-year repayment plan. If that borrower had an adjusted gross income of $30,000 and a family size of one, he would pay $166 a month under the current version of income-based repayment. Since the borrower's monthly payment would be lower under income-based repayment, he would be eligible for the program.
But participation in income-based repayment remains low: About 475,000 borrowers were approved for the program by the end of last September. Since then both President Obama and the secretary of education, Arne Duncan, have raised its profile, speaking publicly about the program and introducing changes, such as fast-tracking a plan to lower the level of discretionary income at which monthly payments would be capped. By the end of April, more than 856,000 borrowers had been approved, according to the most recent estimates from the Education Department.
But as many as three million borrowers could probably benefit from the program, estimates Mark Kantrowitz, the financial-aid expert who publishes the Web sites FinAid and Fastweb.
The Education Department isn't setting any targets, says Ajita R. Talwalker, a senior policy adviser there. Its priorities are giving borrowers the information they need to make a good choice about repayment, she says, and removing hurdles for those who want to be in the income-based program.
Despite its advantages, the program is no silver bullet for borrowers. For one thing, making smaller payments over a longer period means paying more in interest. And income-based repayment is only for federal loans, while many borrowers who struggle the most have private debt, too.
Still, experts all seem to think it's a good idea, maybe even a game-changer. "Why does anybody default in the day and age of income-based repayment?" asks Justin Draeger, president of the National Association of Student Financial Aid Administrators.
A Last Lesson on Loans
One explanation, as the White House noted, is borrowers' lack of awareness. Many haven't heard of the program, and even those who have must jump through hoops to find out if they qualify.
The administration hopes to narrow that information gap, spelling out requirements for servicers of direct loans to inform borrowers about the program before they leave college and again when they begin repayment. Federal officials also plan to give colleges a model for explaining loan-repayment options in students' exit counseling.
Students tend to go through that counseling, which colleges must offer under federal law, as busy, distracted seniors on the verge of graduation. The financial-aid office often has to pressure them to take part, says Maureen McRae, financial-aid director at Occidental College. "The realization they've borrowed money," she says, "probably hasn't hit them yet."
At many colleges, exit counseling is done online. And some of the borrowers most likely to struggle never even speed-click through: They drop out of college before the financial-aid office knows they're leaving, says Mr. Draeger.
Even for borrowers who do complete their degrees, loan repayment can come at an awkward time, several months after graduation, when many are moving and trying to figure out their next steps. By the time any grace period on their loans is up, most borrowers have little to no interaction with their colleges' financial-aid offices. Their main points of contact are the servicers of each loan, which lay out their repayment options.
Kerri Padgett had heard about income-based repayment before she finished veterinary school, in 2009, and thought it sounded like a good idea. But getting into the program was "a bit of a mess," she recalls. She had to navigate a customer-service maze and wait months for her application to be approved.
Despite those frustrations, the program has made a big difference, Dr. Padgett says. She still has to make full monthly payments on her private loans, but being in income-based repayment means reduced monthly balances on her federal loans and "more wiggle room" in her budget, she says, so that an unexpected expense need not derail it.
"I hope more people know about it and take advantage of it," Dr. Padgett says of the program.
Borrowers who learn about income-based repayment and decide it's what they want still have their work cut out for them. Federal officials are now trying to streamline the application process, which has drawn many complaints, by letting borrowers whose loans are held by the government prove their incomes by importing tax data from the IRS.
Moves like that, as well as the Obama administration's plans to raise awareness of the program, are good steps, advocates and experts say. But several suggest bigger changes. Why not make the program opt-out, so that those who would benefit are more likely to participate? And what about making loan repayment automatic, with monthly payments withheld from borrowers' paychecks?
Behavioral-economics research shows that people typically choose a program that's easy to understand, says Judith Scott-Clayton, an assistant professor of economics and education at Columbia University's Teachers College. So relying on borrowers to pick a complex though beneficial program, she says, is problematic.
Policy makers are still sorting out the best way to promote income-based repayment for borrowers with heavy debt relative to their incomes, says Robert M. Shireman, a former deputy under secretary of education. "How do we make sure when they do need it, a sign flashes in front of their face: 'This helps! Push this button!'?"
Income-based repayment was never meant to be the best option for everybody. But at a time of sustained worries about students' debt and job options, the program could probably help another couple of million borrowers stay afloat.
Source: Chronicle of Higher Education
Everyone worries about deeply indebted college graduates with poor job prospects. Yet a program that helps those very borrowers, letting them repay their loans on the basis of how much they make, gets little attention.
For a few years now, the government has allowed borrowers whose federal student-loan debt is heavy relative to their income and family size to choose income-based repayment. In that program, they can make smaller monthly payments, and, if they meet certain conditions, the government even forgives their balances, eventually.
When the program began, in 2009, the timing seemed perfect. The economy had slumped, and student-debt levels were on the rise. Those concerns have only increased, but the program, despite its relevance, hasn't become a household word.
In June the White House announced plans to improve the income-based repayment program, acknowledging what experts on student loans already knew: "Too few responsible borrowers are aware of their repayment options."
Income-based repayment isn't for everyone. Most of the 37 million borrowers with outstanding federal student loans are well served by other plans. And not all loans are eligible for the program. It's best for borrowers who are hard pressed to make full standard payments because their student debt is high relative to their income. For example, a borrower with $30,000 in eligible federal loans with an interest rate of 6.8 percent would pay $345 a month under a standard 10-year repayment plan. If that borrower had an adjusted gross income of $30,000 and a family size of one, he would pay $166 a month under the current version of income-based repayment. Since the borrower's monthly payment would be lower under income-based repayment, he would be eligible for the program.
But participation in income-based repayment remains low: About 475,000 borrowers were approved for the program by the end of last September. Since then both President Obama and the secretary of education, Arne Duncan, have raised its profile, speaking publicly about the program and introducing changes, such as fast-tracking a plan to lower the level of discretionary income at which monthly payments would be capped. By the end of April, more than 856,000 borrowers had been approved, according to the most recent estimates from the Education Department.
But as many as three million borrowers could probably benefit from the program, estimates Mark Kantrowitz, the financial-aid expert who publishes the Web sites FinAid and Fastweb.
The Education Department isn't setting any targets, says Ajita R. Talwalker, a senior policy adviser there. Its priorities are giving borrowers the information they need to make a good choice about repayment, she says, and removing hurdles for those who want to be in the income-based program.
Despite its advantages, the program is no silver bullet for borrowers. For one thing, making smaller payments over a longer period means paying more in interest. And income-based repayment is only for federal loans, while many borrowers who struggle the most have private debt, too.
Still, experts all seem to think it's a good idea, maybe even a game-changer. "Why does anybody default in the day and age of income-based repayment?" asks Justin Draeger, president of the National Association of Student Financial Aid Administrators.
A Last Lesson on Loans
One explanation, as the White House noted, is borrowers' lack of awareness. Many haven't heard of the program, and even those who have must jump through hoops to find out if they qualify.
The administration hopes to narrow that information gap, spelling out requirements for servicers of direct loans to inform borrowers about the program before they leave college and again when they begin repayment. Federal officials also plan to give colleges a model for explaining loan-repayment options in students' exit counseling.
Students tend to go through that counseling, which colleges must offer under federal law, as busy, distracted seniors on the verge of graduation. The financial-aid office often has to pressure them to take part, says Maureen McRae, financial-aid director at Occidental College. "The realization they've borrowed money," she says, "probably hasn't hit them yet."
At many colleges, exit counseling is done online. And some of the borrowers most likely to struggle never even speed-click through: They drop out of college before the financial-aid office knows they're leaving, says Mr. Draeger.
Even for borrowers who do complete their degrees, loan repayment can come at an awkward time, several months after graduation, when many are moving and trying to figure out their next steps. By the time any grace period on their loans is up, most borrowers have little to no interaction with their colleges' financial-aid offices. Their main points of contact are the servicers of each loan, which lay out their repayment options.
Kerri Padgett had heard about income-based repayment before she finished veterinary school, in 2009, and thought it sounded like a good idea. But getting into the program was "a bit of a mess," she recalls. She had to navigate a customer-service maze and wait months for her application to be approved.
Despite those frustrations, the program has made a big difference, Dr. Padgett says. She still has to make full monthly payments on her private loans, but being in income-based repayment means reduced monthly balances on her federal loans and "more wiggle room" in her budget, she says, so that an unexpected expense need not derail it.
"I hope more people know about it and take advantage of it," Dr. Padgett says of the program.
Borrowers who learn about income-based repayment and decide it's what they want still have their work cut out for them. Federal officials are now trying to streamline the application process, which has drawn many complaints, by letting borrowers whose loans are held by the government prove their incomes by importing tax data from the IRS.
Moves like that, as well as the Obama administration's plans to raise awareness of the program, are good steps, advocates and experts say. But several suggest bigger changes. Why not make the program opt-out, so that those who would benefit are more likely to participate? And what about making loan repayment automatic, with monthly payments withheld from borrowers' paychecks?
Behavioral-economics research shows that people typically choose a program that's easy to understand, says Judith Scott-Clayton, an assistant professor of economics and education at Columbia University's Teachers College. So relying on borrowers to pick a complex though beneficial program, she says, is problematic.
Policy makers are still sorting out the best way to promote income-based repayment for borrowers with heavy debt relative to their incomes, says Robert M. Shireman, a former deputy under secretary of education. "How do we make sure when they do need it, a sign flashes in front of their face: 'This helps! Push this button!'?"
Income-based repayment was never meant to be the best option for everybody. But at a time of sustained worries about students' debt and job options, the program could probably help another couple of million borrowers stay afloat.
Source: Chronicle of Higher Education
Save Money! 17 Budget-Friendly Friend Dates
Many of our female students come to us for ideas for fun, budget-friendly things to do with their friends. Here's some ideas:
1. Make brunch at home. Apple crepes, anyone? Whenever we host a friendly brunch, it’s totally BYOM (bring your own mimosa).
2. Visit museums, like the Sheldon Art Gallery or Lincoln Children's Museum. Always a good time!
3. Reschedule girls’ night out. There’s a reason Friday and Saturday nights out are so expensive–that’s when everyone goes out! By rescheduling GNO to say, a Tuesday, you can take advantage of happy hour specials or trivia nights and save a few bucks. Plus, you have work the next day, so chances are slim that you’ll wind up splurging on eight rounds of drinks.
4. Assemble a sports team. We accept all definitions of “sport,” as long as you’re booking a time to meet up with your friends and play it.
5. Hold a moviethon from the year you first met. Was “Beaches” the blockbuster at the multiplex when you first became friends? What movies did you used to serial watch when you lived together in college? Time for a cinematic reunion! If you can’t remember exactly when that was, feel free to revise history. We recommend the year 2004: “Mean Girls,” “The Notebook,” “Eternal Sunshine of the Spotless Mind,” “The Incredibles,” “Anchorman,” “Napolean Dynamite,” “Garden State” …
6. Volunteer together. Searching for volunteer opportunities to strengthen your community and your friendship at the same time? Say it with us: awwwww. Plus, doing good together can be so much more rewarding than complaining about your office/other friends/why you really shouldn’t order dessert.
7. Host a clothing swap. Gather any clothes and accessories you’re tired of or no longer wear, and have your friends do the same. Then, swap. (Here are some swapping ground rules we suggest.)
8. Make a workout pact. It’s two birds with one stone: If you promise to run/do a yoga video/play Wii Fit with a friend, you’re guaranteed to both socialize and exercise regularly.
9. Throw a sushi party. Or a pizza party, or a dumpling party or any food-you-normally-get-at-a-special-restaurant-that’s-actually-fun-to-make-yourself party. As long as you get everyone involved in the making of deliciousness, you’re golden. (Sushi party ideas here.)
10. Network together. Networking events are a great place to score free appetizers–um, we mean make invaluable connections. If you and a friend are motivated to attend a networking event, here’s the trick: split up! For greatest success, agree to meet up every 30 minutes with a new person’s card in hand.
11. Plan a spa night. Yes, we know you can paint your nails, so we’re issuing a new challenge: Create a manicure like this elegant black-on-black or these fun tiger stripes. If you have friends with kids–or are friends with your kids–this is a great activity for them as well.
12. Have a TV show date. If you’re paying for that TV anyway–not that you should, necessarily–you should make the most of it. Plus, shows are always more fun with friends! If you’re up for advanced friend dates, consider creating a themed viewing party, like this one for Downton Abbey. The best part is that, unlike movies, TV shows come on regularly … and make a great excuse to keep a standing date with your best friends.
13. Be adventurous. In the kitchen, that is. Bite the bullet and finally make a few of those recipes you’ve been pinning. Or go ahead and try one of ours, like this pepperoni pannini.
14. Get crafty. You can exercise those elementary-school friendship bracelet stitches (are we the only ones who still remember how to make those?). Or you can make something a little edgier, like this cool DIY rope bracelet. Alternately, there is always a holiday approaching, as evidenced by the themed aisle in the drugstore. Get together to craft decorations for the nearest one, whether Halloween, Thanksgiving or Christmas (bonus points for doing that one in July).
Source: http://www.learnvest.com/2012/10/17-budget-friendly-friend-dates/?utm_source=email&utm_medium=lvdaily&utm_campaign=titlejump
2. Visit museums, like the Sheldon Art Gallery or Lincoln Children's Museum. Always a good time!
3. Reschedule girls’ night out. There’s a reason Friday and Saturday nights out are so expensive–that’s when everyone goes out! By rescheduling GNO to say, a Tuesday, you can take advantage of happy hour specials or trivia nights and save a few bucks. Plus, you have work the next day, so chances are slim that you’ll wind up splurging on eight rounds of drinks.
4. Assemble a sports team. We accept all definitions of “sport,” as long as you’re booking a time to meet up with your friends and play it.
5. Hold a moviethon from the year you first met. Was “Beaches” the blockbuster at the multiplex when you first became friends? What movies did you used to serial watch when you lived together in college? Time for a cinematic reunion! If you can’t remember exactly when that was, feel free to revise history. We recommend the year 2004: “Mean Girls,” “The Notebook,” “Eternal Sunshine of the Spotless Mind,” “The Incredibles,” “Anchorman,” “Napolean Dynamite,” “Garden State” …
6. Volunteer together. Searching for volunteer opportunities to strengthen your community and your friendship at the same time? Say it with us: awwwww. Plus, doing good together can be so much more rewarding than complaining about your office/other friends/why you really shouldn’t order dessert.
7. Host a clothing swap. Gather any clothes and accessories you’re tired of or no longer wear, and have your friends do the same. Then, swap. (Here are some swapping ground rules we suggest.)
8. Make a workout pact. It’s two birds with one stone: If you promise to run/do a yoga video/play Wii Fit with a friend, you’re guaranteed to both socialize and exercise regularly.
9. Throw a sushi party. Or a pizza party, or a dumpling party or any food-you-normally-get-at-a-special-restaurant-that’s-actually-fun-to-make-yourself party. As long as you get everyone involved in the making of deliciousness, you’re golden. (Sushi party ideas here.)
10. Network together. Networking events are a great place to score free appetizers–um, we mean make invaluable connections. If you and a friend are motivated to attend a networking event, here’s the trick: split up! For greatest success, agree to meet up every 30 minutes with a new person’s card in hand.
11. Plan a spa night. Yes, we know you can paint your nails, so we’re issuing a new challenge: Create a manicure like this elegant black-on-black or these fun tiger stripes. If you have friends with kids–or are friends with your kids–this is a great activity for them as well.
12. Have a TV show date. If you’re paying for that TV anyway–not that you should, necessarily–you should make the most of it. Plus, shows are always more fun with friends! If you’re up for advanced friend dates, consider creating a themed viewing party, like this one for Downton Abbey. The best part is that, unlike movies, TV shows come on regularly … and make a great excuse to keep a standing date with your best friends.
13. Be adventurous. In the kitchen, that is. Bite the bullet and finally make a few of those recipes you’ve been pinning. Or go ahead and try one of ours, like this pepperoni pannini.
14. Get crafty. You can exercise those elementary-school friendship bracelet stitches (are we the only ones who still remember how to make those?). Or you can make something a little edgier, like this cool DIY rope bracelet. Alternately, there is always a holiday approaching, as evidenced by the themed aisle in the drugstore. Get together to craft decorations for the nearest one, whether Halloween, Thanksgiving or Christmas (bonus points for doing that one in July).
Source: http://www.learnvest.com/2012/10/17-budget-friendly-friend-dates/?utm_source=email&utm_medium=lvdaily&utm_campaign=titlejump
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