3 Ways To Shrink Your Monthly Student Loan Payment

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If you become nauseous when you start thinking about your student loan debt, you’re not alone.

About 44 million Americans have student loan debt[1]

Although student loans are sometimes necessary for many of us to become college students, student loan debt can sometimes feel like a mortgage, especially once the payments become due. The fact is that student loans can be very expensive and can take years to pay off. Many student loan providers make more money if it takes you longer to pay off your loan. With that in mind, there are three different (but not well-known) tactics you can use to reduce your monthly payments if you’re in a money crunch.

For newlyweds, the monthly payment owed that once seemed manageable might start to look like an overwhelming and impossible hurdle, especially if both spouses are bringing student debt to the table.

Trying to pay off student loan debt?

Here are three ways most likely to reduce your monthly stress caused by student loan debt.

  1. Refinance for a lower interest rate. This is one option for couples with private loans, which typically have the highest rates. If you have a government loan however, be cautious if you go down this route. You may lose some of the benefits provided by a government-backed student loan.

  2. Consolidate your student loan debt into one place. This may equate to a lower monthly payment. However, keep in mind that this may extend your payments farther out which could result in you paying more money in the long run. Couples who have a serious cash flow problem may want to think about this option.

  3. Ask your spouse to help you pay off your student debt. If you share finances with your spouse, explain that you wouldn’t have the job you do without your education. Now that the wedding has passed, the financial burden of one now has become the burden of both. Since your job is contributing to your financial well-being as a couple, asking your spouse to help share the payment for an investment, you made in yourself, is perfectly reasonable.

It truly is a case by case scenario to determine what the best option is for your specific situation.  That said, we collected some helpful articles about student loan debt. After reading these, hopefully, you will learn where to go for up-to-date research on student loan debt and have the confidence to make a more informed decision. 

These articles helps you decide whether you should consolidate or refinance:

https://lendedu.com/blog/refinance-student-loans/#refi-info

https://studentloanhero.com/student-loan-refinancing-cheat-sheet/?utm_source=automationemail&utm_medium=email&utm_campaign=refi-refiautomation&utm_content=ba-email1

10 questions to ask yourself before you refinance:

https://studentloanhero.com/featured/10-questions-to-ask-before-refinancing-your-student-loans/

To play devil’s advocate, 5 reasons why you SHOULDN’T refinance: https://studentloanhero.com/featured/refinance-student-loans-bad-idea/

5 ways marriage could alter your student loan debt, “for better or for worse”:

https://www.nerdwallet.com/blog/loans/student-loans/5-ways-marriage-affects-student-loans/

[1] “U.S. Student Loan Debt Statistics for 2018.” Student Loan Hero, Student Loan Hero, studentloanhero.com/student-loan-debt-statistics/.

8 Tricks To Avoid/Prevent Financial Scams

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1.       Look for skeletons in the closet: Before making any major financial commitment to a professional asking you for your hard-earned money, consider running a background check on them to identify any pattern of civil lawsuits, criminal issues, lost licenses, bankruptcies, foreclosures, etc. While it’s personal and you may be worried about offending them, remember that they asked you for your money, and that’s about as personal as it gets. Don’t be afraid to remind them of that! If they have nothing to hide, they should gladly participate in your due diligence. Here are a couple providers you might want to use that we have used in the past for hiring decisions and due diligence on vendors.

a.       Info Cubic
b.       Hire Right

2.       If they say they are “licensed”, confirm it – most professional designation and licensing programs subject a professional to a rigorous process to keep current. 1 – they have to stay out of trouble and 2 – they have to do continuing education. Most of the organizations that sponsor these licenses have a database, so the public can quickly look-up if someone is in fact licensed and in good standing.

 3.       Frequently check your credit report – the oldest trick in the book used by identity theft scammers involves taking out a loan in your name and running away with the money. This is difficult to avoid if a crook gets their hands on your personal information, but it’s easiest to flag if you make a habit of monitoring your credit report. When a loan is taken, most creditors submit an inquiry on your credit report. There are several services out there that will notify you when an inquiry has been made on your credit, or, if your credit history has a major change (like a new loan). Using one of these services can help you spot the issue early.

4.       Don’t provide your personal information over the phone. For starters, the IRS WILL NOT contact you by phone. They do things by mail. If the IRS is “calling you” hang up… it’s not actually them. If you get a call from your bank or insurance company and they ask to “authenticate” you before proceeding, ask for a call back #, then look up the call back # to make sure it’s actually your bank. A lot of scammers will call posing as your bank to obtain your online username, date of birth, social security # etc, to use on your various financial websites.

5.       Check your bank statements and credit card statements for unknown charges. This one is fairly obvious, but from working with clients, it’s amazing how many people don’t do this. Not only is a periodic review of your statements important for fraud prevention, it’s also important to avoid unknowingly wasting money. With todays’ most popular business structure being the “subscription revenue model” it’s incredibly easy to forget you are paying for certain services (many apps, websites, etc.) that you don’t use anymore… Services that are still dinging your credit card bill every month. Make a habit of doing this review at least every couple weeks.

 

6.       Be suspicious of guarantees. As the great Benjamin Franklin once said, “Nothing is certain except for death and taxes”. That absolutely applies to investments. Only FDIC insured bank accounts, CD’s and US treasury bonds are backed by the full faith and credit of the United states. Everything else has some element of risk of loss.  Even government guaranteed products, one could argue, aren’t guaranteed. If you meet a charlatan peddling guaranteed anything (particularly rates of return), tuck tail and head the other way.

7.       Live by the old auditor adage, “trust but verify”. With the internet, it’s SO much easier to do this than it was in the past. If someone says they have a unique offering, a patent, a license, an “in”, a hot tip, etc. do some back-channel research on what they told you via online searches to see if you can find any contradiction. If you are considering something like an investment in a new industry in which you are unfamiliar, asking around, particularly to other people whom you trust that might have some exposure and experience to it that you don’t.

8.       Ask for existing client references. This again is obvious, but make sure you do this with any professional you are relying upon for financial advice. If they can’t quickly get you at least 2-3 people who’d speak kindly of them and their service, that’s a telling sign. Possibly, this is characteristic of someone who has scammed people in the past.

Marriage Money Bootcamp is now Launched! 


We’re proud to announce the official launch of our comprehensive Marriage Money Bootcamp course! Starting last year, our team has been working hard putting together the content, producing lectures, worksheets, interviews, etc. Here’s a look back on the impetus for the course.

 

Why?


Richard first told me about the idea of a course tailored to newlyweds sometime in early 2017. Richard, a CFP® with his own private practice, mentioned that he was noticing a trend of people stepping into his office that were in the “newlywed” stage and had tons of questions and enthusiasm to learn about how to manage their finances with the impending life change. 

While these people had mentioned a clear interest in setting up a good financial foundation for their commitment to their significant other, many of them were not quite in a position or comfortable paying the cost of an engagement with a certified financial planner.

When trying to find some more reasonably priced educational options that couples could use, there was not much to really point them to. Outside of a few obsolete and incomplete books available on amazon, and a ton of noisy and conflicting, if not flat out wrong, info on the general web - there didn’t seem to be anything he could confidently offer.

 

How?


So, at this point we started having a few conversations and outlining a general idea of what would end up being what the comprehensive course looks like today. Our team (Richard, Trevor and I) drew up a basic outline of what we thought the course should entail, interviewed people in our target market, and purchased about every tangentially related book and materials and became experts in the subject matter.

 Just a few of the materials we scoured through...

Just a few of the materials we scoured through...

We had a complimentary mix of different backgrounds (mine in software engineering and other roles at a few startups and Trevor and Richard’s in various financial disciplines), but we were all new to the idea of full-on producing video content. With some helpful encouragement and advisement from Chris Haroun, who’s been quite a success with his Udemy based business courses, we trial and error’d our way to what the course looks like today. 

 

So… What is it?


So what does the course entail? It’s a mix of educational video lectures, spreadsheet walkthroughs, interviews with experts in related domains (like with a marriage family therapist, and plans to interview a divorce attorney in the near future), and a powerful comprehensive workbook that has professionally built spreadsheet templates with built in formulas so that you can get real answers based on things like your personal income. Optionally, we’re offering a video chat consultation for anyone who is looking to ask direct questions to a certified professional in the field

 The comprehensive workbook

The comprehensive workbook

 Interviewing Victoria Vogel, Marriage and Family Therapist

Interviewing Victoria Vogel, Marriage and Family Therapist

 

This comprehensive course is ideal for those in a new relationship starting to plan for their future, or coming across one of those major points in life were some education and planning is merited and can go a long way (purchasing a home, dealing with debt, planning for kids, etc.). You don't have to go at it alone.

We believe this course is the easiest, most expedited and cost effective solution for couples who are committed to building their financial future together.

For anyone who is interested, we offer a 100% money back guarantee. If you have any questions whatsoever, don't hesitate to reach out to us.

Interested in getting a look? Check out the course preview.

 Team MMB

Team MMB

Have questions? We’d love to hear from you - e-mail us at info@mmbcourses.com, like our Facebook page, and/or sign up for our blog for more information and related writings.

Interview with a Marriage and Family Therapist

We were fortunate to be able to interview Victoria Vogel, Clincial Director at Echo Rock Neurotherapy. In this interview we discuss various topics related to couples including some of the top reasons Victoria see's patients, some preemptive strategies for preventing conflict in a relationship, action items for expecting parents, what debt can do to a relationship, etc.


Education Expense Inflation: Why We Are Hopeful History Won't Repeat Itself.

According to an article published by US News in September 2017, tuition at in-state public universities more than tripled from 1997 to 2017 (300% increase). Private university tuition increased by over 200%. Meanwhile, the US CPI (inflation index) increased only ~53%. 

What does this tell us? College education inflation has significantly outpaced normal/broad-based inflation over the last 20 years by a very wide margin. If this persists, parents' ability to save for their kid's future college expenses will diminish to a point wheres all but the ultra rich will be priced out of the higher education market.

 We don't expect college tuition raises to increase at the same rate they have been.

We don't expect college tuition raises to increase at the same rate they have been.

What or who was to blame? More kids going to college? More access to student loans (both federal and private)? An ever-increasing wage gap between college educated vs. high school GE individuals forcing more people to pile on debt to stay competitive?

We think it's a combination of all of the above. However, we are not convinced this significant disparity between broad inflation and education inflation will persist over the next 20 years.

Why?
It's simply not sustainable. At some point, demand should subside (because of unreasonable / unaffordable growth of college expenses relative to the incremental earnings a college degree generates) causing costs to fall. After all, the demand for higher education comes from people seeing the return on the investment in the education and from easy access to student loan credit. As costs go up, the return on education acts inversely... that is, it goes down all else being equal. 

Online Education Is Here to Stay - many reputable higher education institutions are now offering 100% online degree programs that give students the opportunity to obtain an equivalent degree to those students going through the in-person (more expensive) programs. Some large employers are even paying for the cost of these online degree programs to retain employees long-term via work-study programs. That's a direct shout-out to Starbucks btw who has partnered with Arizona State University Online to provide this AWESOME employee benefit.  Kudos to you Starbeez. 

Peer to Peer Education Websites Are Gaining in Popularity - while they don't necessarily carry the "prestige" of a degree from an accredited institution, consumers of education can definitely find quality content at very low prices (we'd like to think Marriage Money Bootcamp will fall in this category). These alternative education sources will put downward pricing pressure on traditional 4 year universities. 

Online "competency" testing tools may shift us to more of a meritocracy vs. a 4-year-degreeocracy.  If technical / competency testing tools become more instrumental to the hiring process, more consumers will have the opportunity to "self-teach" a skill and prove themselves via these tests vs. having to provide evidence of a formal degree. For instance, there's now precedent in the software engineering industry to weigh results of an online skills test, like HackerRank, over what institution a candidate came from.

We love this trend as it should support more equality of opportunity in the future as lower-income people will have a less expensive path to gaining more job skills and access to higher paying jobs via persistence and self-teaching using online programs.

The Social Construct Is Changing, Politicians Are Once Again Urging a Re-Focus On Apprenticeships and Vocational Programs

There still seems to be a negative stigma against people in the workplace who don't have a 4 year degree. But, the idea that one most have a 4 year degree to be worthy of a high-paying job is changing.  Just google "apprenticeships vs. college" and you will see a long list of reputable sources outlining the need and the attractiveness of going the vocational route vs. a 4 year degree.

As Forbes outlined in a March 2017 article, Germany, despite very high wage costs has been successful with their diversified apprenticeship system in building one of the world's strongest "export economies focused on high-value manufacturing". If more of our youth consider non-4 year degree vocational programs, there will be further downward pressure on traditional college costs.

Conclusion
Long-term, we believe that a financial plan that addresses college education funding needs can and should estimate future cost increases closer to broad-based inflation levels (3-4%) vs. the rates of increase seen in the last 20 years (~5-6%). This scaled back assumption should provide for more realistic monthly savings targets which will free up cash flow for other worthy financial planning uses such as increased funding of retirement accounts, debt payment plans, or insurance/protection programs.

 

References

https://www.usnews.com/education/best-colleges/paying-for-college/articles/2017-09-20/see-20-years-of-tuition-growth-at-national-universities
https://www.forbes.com/sites/nicholaswyman/2017/03/21/why-5-million-apprenticeships-will-make-america-great-again/#7eaf4bcb2fce

Financial Documents: How to Organize Your $h!t

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Richard Davey

CPA, CFP®

In our intake process with new financial planning clients, most couples express that they need help “organizing” financial documents.  While we had a great tabbed and color-coded binder that we provided to everyone who paid us for a financial plan, we often asked in follow up appointments if they were still using it. 

Shocker! Our ongoing customer usage rate with these binders was near 0% after plan delivery. 

In today's day and age, the consumer doesn't have the patience or discipline to store all their information in a filing cabinet or binder. It just takes too long and it's too messy. By the way, this isn’t a shot at my clients and their “lack of follow through”. My wife and I were guilty of the same thing. Our filing system was a joke. Too disorganized, bills were being missed, statements lost, etc.  Some stuff was stored digitally, while other things were haphazardly saved in paper format (usually mounting as a pile on our kitchen counter).

So, we set out to build a system that couples would actually use.

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First, we knew it had to meet some basic criteria: (1) It had to be easy to use, (2) it had to be digital, and (3) it had to be compatible with both iPhone and Android operating systems. Further, consistency was vital.

With some trial and error, we finally came up with a system that has worked well for us over the last few months.  We use two apps. The CamScanner PDF converter, and Google Drive. Both work seamlessly with either phone operating system. Also, we had to “schedule” time to store our info - that’s the whole consistency piece. Now we do it weekly; that is, we inventory our mail and digitally delivered documents and scan/upload it all in bulk every Sunday.

Why We Like CamScanner and What It Does

  • Takes photos and converts them to higher quality PDFs

  • Allows the user to easily take pictures of multiple pages and combine them into one PDF

  • Once PDFs are generated in the APP, sharing the PDF via email or storing in the cloud is incredibly intuitive.

  • Write-On PDF Capability – once you have created your PDF, you can also write on it with your finger. So, for docs that need signatures, you may be able to use it for this process as well (some people may not accept signatures in this format, but you can try).

 
 An example of the CamScanner app with a signature added.

An example of the CamScanner app with a signature added.

 

Why We Like Google Drive and What It Does

  • Allows for storage in the cloud with controlled access to other users
  • You can share files with people even if they don’t have a “gmail” account.

  • It’s one of the more ubiquitous cloud solutions

  • It pops up easily as a “shareable location” for pictures taken on your phone and those converted to PDF with an app like CamScanner.

Now Everyone's File Structure Will Be a Little Different, But Here's Ours:

  • Tax Documents

  • Home Improvement Receipts

  • Estate Planning Documents - will, trust, healthcare directives, powers of attorney, etc.

  • Employee Benefits - offer letters, stock comp info, retirement notices, etc.

  • Investments - quarterly and annual statements and performance reports

  • Insurance - medical, dental, vision, disability, homeowners/renters, umbrella, etc.

  • Children >> School, Daycare, Other

  • Utilities

  • Medical >> one sub-folder for each member of family

  • Debts >> mortgage, credit cards, student loans, etc.

While all of this may seem obvious, particularly for tech-savvy individuals, it’s amazing to me how few people have a diligent and organized filing system. And I’ll admit, until about 6 months ago, we were guilty too. Committing to this system has changed our lives for the better. And, more importantly, it’s also been good for our marriage.

So, I encourage you, if you are reading this, take this first (and easiest) step toward a successful financial life. Build a document filing system, stick to it, and periodically refine it as circumstances in your life change to make it better.

Downpayments: Why 20% is the Magic Number for Home Purchases

 
 Richard Davey  CPA, CFP®

Richard Davey

CPA, CFP®

 Trevor Scotto  CPA, CFP®, CDFA  ®

Trevor Scotto

CPA, CFP®, CDFA

®

 

Remember learning about how much money you should put down when buying your home in high school?  Me neither. Wouldn’t it be nice if someone would just tell us what the right amount is? Here are a few reasons that we recommend having at least 20% as a down payment.

1. You will avoid unnecessary fees

Private Mortgage Insurance (PMI) is insurance that is solely intended to protect the lender in the case you can’t keep up with your mortgage payments, but you are the one required to pay for it. PMI is usually thrown into the total costs of the mortgage when you, as a lendee, put in less than 20% of the down payment.  

This is important for you to know about because PMI could be costing you hundreds of extra dollars each month to buy your home without any tax advantages (or benefit to you). Many Americans pay PMI each month, but that doesn’t mean you have to.

On average, PMI costs around .5% to 1% of the loan amount. This means that for a $400,000 mortgage, you could end up paying up to $400 extra a month, just to protect the mortgage lender. We would prefer this cash go to your retirement/emergency fund or even your leisure fund.

Note that these extra PMI payments typically terminate when the equity in your home reaches 20%, but not always. In some cases you can get your PMI waived, but we would still recommend being cautious about moving forward with that kind of arrangement, as we’ll expand on in point #3.

2. Potentially qualify for a lower interest rate

If you put 20% down, you have a lot to lose in a bank foreclosure if you miss your payments. Because you have put a good chunk of the value down as a payment, the lender will likely offer you a better rate knowing you have a lower risk of missing payments and walking away from the house entirely (foreclosure) vs. someone who is only putting down 5-10%.

Even a small reduction in your interest rate can go a long away. For instance, a $500k 30 year loan with a 4.75% interest rate incurs ~$23,500 in interest expense in the first year of the loan. That same loan with a 4.25% interest rate incurs ~$2,500 LESS interest. That’s $2,500 staying in your pocket vs. going to the bank.

3. Reduce your chances of buying “too much home”

Every dollar you borrow increases your mortgage payment which increases the chance of being overextended in your home budget. Lenders prefer the 20% down payment because it shows the buyer is serious about the home and their intention to stay in it while making timely payments. After all, if you buy a $500,000 home with a $100,000 down payment, you are going to fight tooth and nail to make timely payments to avoid putting your $100k down payment at risk. If you only put 3% down ($15,000) there is less incentive to keep up when times get tough.  

It’s usually a good rule of thumb to avoid acting in a manner that would characterize you as a “high default risk” buyer in the eyes of the bank. If the bank would classify you as “high default risk” for putting down less than 20%, you should probably take that personally. Do YOU want to put yourself in a position of high default risk? After all, foreclosures are horribly damaging to your credit score and ability to borrow in the future.

The bottom line is this, the next time you are looking at your next home, make sure you have enough to afford at least a 20% down payment. 

 

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Thinking about buying a home?

"Financial Planning for your First Home" online course is now available!

25% discount available for the first 25 who use it.

Use the 25_FOR_25 coupon code while it lasts!

 

Let us know if you have any questions or comments!

Financial Advisors: What to look for when shopping for one

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Richard Davey

CPA, CFP

So, you’ve set out to get “serious” about your finances. Maybe it was your new year’s resolution to make some progress on your financial picture, you’ve had (another) quazi-argument with your significant other that’s rooted in a financial disagreement, or you’ve just found out about a colleague who is throwing a housewarming party and maybe you've got just a hint of envy. Whatever the trigger is, your intention is to take the next step with your finances.

But, where do you start? Maybe you’ve been putting a portion of your income into a savings account but it’s basically earned you nothing extra. You know that you should be letting your “money work for you”, but, what does that mean exactly? What type of investments should you consider? Ok, so there’s mutual funds, stocks, bonds, and ETFs. What is an ETF? You’ve read something about permanent life insurance being the best option while you also read a headline that says that’s the last thing you should do. Is it worth investing your time in doing it yourself with Schwab, eTrade, Fidelity, TD Ameritrade, etc. or do you work with an advisor?

It’s clear that all of this has gotten overwhelmingly complicated. This complexity is the exact reason so many people, even when they have the desire and financial ability to participate, tend to put it off. The number of investment options alone makes thinking about getting involved with investments uncomfortable enough to kick the can down the road for years at a time. But, in the back of your mind, you know you can’t just pretend it doesn’t exist forever.

 Financial complexity tends to cause people to put off decision making.

Financial complexity tends to cause people to put off decision making.

After almost eight years of studying in school, a handful of professional designations, and working with over a 100 clients, I’ll never know everything about finance, nor will I ever. As with most professionals, I’m a proponent to sticking to what I do best, and I rely on others who do the same at their own different disciplines. Therefore, this blog will be about the types of advisors couples should consider hiring - not the options for doing it yourself.

At its core, financial planners are responsible for advising clients on the best way to save, invest, grow, and protect their money. Maybe you have a specific financial goal - such as readying yourself to buy a house or fully funding your children’s education - or, they can help give you a high level view of your various assets. Some specialize in retirement or estate planning, while some others consult on a range of financial matters.

For those in relationships, couples should start with understanding and getting aligned with each other. Couples need to understand each other’s feelings on risk tolerance, spending priorities, and agree on some joint goals. If you'd like a cheat sheet to help you get started with establishing joint goals, add your e-mail below to get access to the link. 

Once you’ve started establishing where you stand as a couple, I recommend taking some time to shop for a financial adviser:

  • There’s a couple of different ways advisors can get paid, and it’s import to understand how the difference in incentives impacts the way they do their job. Take some time to research and interview each framework. This is not an exhaustive list but should give you a good place to start.

    1. Hourly Planner

    2. Commissioned Broker

    3. Fee-only Advisor

  • Get referrals from people in your network, including co-workers. Employee benefits plays a pivotal role in your finances. Advisors who are already familiar with how benefits work for your organization will have an advantage.

  • Research the firms backing the advisors you choose to interview. No I don’t just mean Yelp. In fact, a lot of advisors won’t even be on Yelp for compliance reasons. Look at Glassdoor.com. This site has a library of employee reviews on the major firms. Posts from disgruntled employees is a BAD sign and may indicate the firm’s values are questionable. It may also lead to high advisor turnover putting your accounts at risk of being “orphaned” if your advisor gets fed up and leaves the firm or industry altogether. General google searches might turn up some interesting pieces of evidence also.

  • Question the experience of the advisor. What makes them competent to handle your finances? If they are new to the business don’t just write them off. They may have a mentor working with them on their accounts who has stellar insight from decades of experience. If you end up gravitating to someone younger, I would simply ask to have their more experienced supervisor collaborate with the younger associate in handling your case. In doing so, you might just get the best possible service from the newbie who has something to prove in keeping you happy whereas the 60-year-old VET nearing retirement probably doesn’t need your business quite so much.

  • Ask for their credentials. Do they hold professional designations? If so… which ones?  It’s a joke how easy it is to get certain initials behind your name in financial services these days. The big three, per several very well-respected publications, are the CFA (Chartered Financial Analyst), CFP® (Certified Financial Planner), and CPA (Certified Public Accountant).  These credentials require substantial real-world experience to obtain the marks along with several months if not years of study to pass the exams.

  • Do a background check. Almost all financial advisors can be investigated as most regulators require us to publish information about past disciplinary history, major client judgments/complaints, bankruptcies, criminal convictions, etc. Below is a list of links where you should be able to look up your advisor’s record and status of their license. If they are not willing to help you do this, be weary.

Do your research and enable yourself to make confident decisions moving forward!

Sincerely,

Richard Davey