Author: Money Maroon

Paying Off Student Loans Is The Key To Freedom

Paying Off Student Loans Is The Key To Freedom

Money Maroon

Let’s face it, in the current education climate, student loans are here to stay. While there are some talks of reforming higher education in the United states, it is unlikely that post-secondary education will be cheaper over time, or free. While there may be some loan forgiveness in the future, a complete forgiveness of all student loans is unlikely. If you have student loans, know that there is a light at the end of the repayment tunnel. Paying off student loans can be the key to freedom.

Student Loans Are Here To Stay

In today’s world, no matter your level of education above high school, whether an associates degree, bachelor degree or a professional degree, it is highly likely that you will graduate with student loans. It has become a fact of life. This is why it is so important to think about paying off student loans. Do not fall into the trap of thinking about your student loans only following graduation. It is important to be well aware of the costs and benefits of taking out student loans before you borrow a dime.

Be Strategic

If you are strategic with your education experience, your student loans can represent the ultimate investment in yourself. It may potentially be a way to a higher paying job and life long experiences. However, student loans can be a life changing burden and a huge economic cost. Student loans can be a detriment or an accelerant to a great financial future.

Once you have accumulated your loans and have graduated, one of your biggest expenses going forward will be the monthly cost to repay your student loans. For some, this will rival mortgage costs or a car payment and can be financially crippling. In many cases, your student loans will be the barrier to freedom. Freedom to choose where you want to work and the type of work you will be doing.

Paying Off Student Loans 

With regard to your job after graduation, having a mountain of student loans can limit your decisions and opportunities significantly. Do you take a job that will help in paying off student loans at a very fast rate, take a job that pays less but is what you want to do, and if you are lucky, you will be able to do both (the perfect job). For most, the perfect job that is high paying and also focused on what you want to do is a rarity when you leave school. So the decision is frequently, (a) do you take the high paying job that may not be in your specific area of interest, or (b) earn less but enjoy your job.

Paying Off Student Loans  – Short Term Pain For Long Term Gain

While I do believe that life is short and you should enjoy your time on this planet, I would not advocate for taking the lower paying job, if it pays significantly less. Taking a high paying job that speeds up your time to freedom could be beneficial. Financial Independence takes time, the earlier you start the faster you will get there. Taking the job that accelerates paying off student loans should be considered in view of the future implications.

Do the math, if you did not have a student loan payment, how much money would you need per year to be able to live comfortably? I am not talking about living in a lap of luxury, I am talking about having a home for your family and being able to take care of your necessities and  reasonable wants. I can almost guarantee that the amount is significantly less than what you may have thought.

Conquer the ball and chain of student loan that is holding you back

By obtaining employment that allows you to pay off your student loans at a faster rate, you are able to decrease your time under the thumb of a student loan payment. Whatever method or tricks you use to pay off student loans, your future will be the winner. By paying off student loans, you are able to achieve freedom, not  total financial freedom, but the freedom to move from a high stress job to one that you like and find fulfilling. The freedom to get your time back. The freedom to move locations, because a high paying job is not needed for you to survive.

Be Proactive

Instead of waiting on what the government may do with regard to student loans, be proactive and make progress in removing the ball and chain that is student loans and conquer life’s challenges. In any case, if you are aggressively paying off your student loans, if a certain amount is eventually forgiven by the government, that forgiveness will only accelerate your time to freedom from student loan debt.

Conclusion

Let’s face it, in the current education climate, student loans are here to stay. While there are some talks of reforming higher education in the United states, it is unlikely that post-secondary education will be cheaper over time, or free. While there may be some loan forgiveness in the future, a complete forgiveness of all student loans is unlikely. If you have student loans, know that there is a light at the end of the repayment tunnel. Paying off student loans can be the key to freedom.

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Optional Spending

Discretionary Spending And Your Financial Future

Money Maroon

Discretionary spending refers to optional spending. Spending for wants and not needs. As we get closer to another holiday, whether religious or market created, you must decide how to spend your income. Will you fall prey to the mountains of commercials advertising different deals, or will you keep your discretionary spending to a limit? Whatever your decision, your financial future depends on it.

Before Discretionary Spending, Wait

It is your money, you don’t have to part with it. Consider that you have worked many hours for what you have. After paying for the necessities, you may have a certain amount remaining. You may even have accumulated a certain amount of money over time. With this backdrop, why would you so easily part with your money because of an advertisement, black Friday, small business Saturday, cyber Monday or another commercial holiday? Why would you part with your hard earned money to impress people who likely do not have a second thought about your financial future?

Stop throwing away your money

When you are thinking of parting with your money, discretionary spending, just remember that the spending is optional. You will be spending on a want, and not a need. You do not have to buy that new TV, shoe, computer or car. Do you really need that new subscription or membership? Do you really have to take that expensive vacation? If you think you do, it is best to wait, press pause and think about that next purchase. 

Give yourself at least a week before you spend your money. Think not only of the cost of the purchase, but the true cost of ownership. What other costs are associated with your purchase. Can you really afford it? Think of how many hours you would need to work to earn the amount that you would like to spend.

Think About Saving

During your week of thinking about your next discretionary spending binge, think of what would happen if you saved or invested instead of spending that money. If instead of spending the money you save it in a high yield saving account or invest the money and receive standard rate of return, how much would this money mean to your financial future?

Now, is your discretionary spending worth it? Is it worth the cost of the purchase and related costs plus the additional lost of return on savings and/or investment?

Further, if you were thinking of discretionary spending to impress someone, think of where that purchase will be in two, three or four years – most likely forgotten. Do not spend to impress others. You are responsible for your financial future. Take control, set  your goals and achieve them.

Your Decision Your Future

After delaying your discretionary spending to reflect, if you choose to go ahead with the discretionary spending, at the very least  you have thought about it and have justified the spending. By delaying the purchase and having an understanding of the true costs associated with a purchase, you will be able to make an informed decision. Whatever your decision, let this moment of financial reflection change your money mindset for the future.

Conclusion

Discretionary spending refers to optional spending. Spending for wants and not needs. As we get closer to another holiday, whether religious or market created, you must decide how to spend your income. Will you fall prey to the mountains of commercials advertising different deals, or will you keep your discretionary spending to a limit? Whatever your decision, your financial future depends on it.

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529 Plan

529 Plan: Contribute Today For Your Child’s Tomorrow

Money Maroon

It is important to secure your financial future first, before turning to your children’s. However, once you turn to the financial future of your children, a 529 plan should be on the top of the list. 529 plans allows account holders to put away funds for a beneficiary, typically a child or other loved one.

529 Plan
529 plan, a plan for your child’s future

Overview: 529 Plan

529 plans are authorized by Section 529 of the Internal Revenue Code and were designed to encourage saving for future education costs. When first instituted, 529 plans were limited to covering the costs of post-secondary education. Overtime, qualified education costs covered by 529 plans were expanded to also cover K-12 education in 2017 and apprenticeship programs in 2019. In view of the rising costs of education, if you have children, a 529 plan should be apart of your financial tool kit.

Types Of 529 Plans

Generally speaking, there are two types of 529 plans. A prepaid tuition plan or an education savings plan. According to the SEC, most all States and the District of Columbia sponsor at least one of the two types of 529 plans. Additionally, some private colleges and university may also have similar plans. Note that Wyoming is the only State that does not offer its own 529 plan.

Prepaid Plan

The prepaid 529 plan allows account holders to purchase units or credits at participating colleges and universities (usually public and in-state) for future tuition and mandatory fees at current prices. As such, you are locking in today’s prices. This can be a significant benefit in view of costs savings when taking into consideration the consistent rise in education costs over time.

Savings Plan

529 savings plan allow an account holder to open an investment account to save for the beneficiary’s future. The saved amount can then be used to pay for qualified expenses. Such qualified expenses include tuition; room and board; mandatory fees; and, books, and computers.

With regard to the investment account, in ways similar to a brokerage account, the account holder can chose from a range of investment options (target date funds, ETFs, Mutual funds) that is offered by the respective State or vender used by the State to carry out the 529 program. As such, prior to selecting a fund to invest in, it is important to carefully review the options available and the associated fees.

Taxes

529 plans are often referred to as a tax advantage account because of the associated federal and State tax advantages.

Contributions

Many States offer tax benefits for contributions to a 529 plan. These tax benefits typically include a State income tax deduction up to a certain limit contributed. Usually, these tax benefits are limited to residents of that State. For example, if you are a resident of Maryland and have a Maryland 529 plan, you would be able to deduct a certain amount of your Maryland 529 contributions from your Maryland State income tax. On the other hand, if you are not a resident of Maryland, and have a Maryland 529 plan, you would not be able to deduct your contribution from your home State’s income tax. 

Unfortunately, unlike the State tax deduction, on a federal level, the money you contribute to a 529 plan is not tax-deductible for federal income tax purposes.

Withdrawal

With regard to withdrawals for qualified expenses, 529 earnings are not subject to federal income tax and, in many cases, State income tax. However, if 529 account withdrawals are not used for qualified expenses, the funds will be subject to both State and federal income taxes and an additional 10% federal tax penalty on earnings.

Growth

Another benefit of 529 plans is the tax-free earnings that grow over a period of time. Growth of funds in your 529 account are not taxed. Therefore, the longer your money is invested in a savings plan, the more time it has to grow and the greater the tax benefit. The upshot here is a simple one. Although contributions are not deductible from your federal income tax, earnings in a 529 plan grow federal tax-free and will not be taxed when the money is taken out to pay for qualified expenses. 

Conclusion

It is important to secure your financial future first, before turning to your children. However, once you turn to the financial future of your children, a 529 plan should be on the top of the list. 529 plans allows account holders to put away funds for a beneficiary, typically a child or other loved one. A 529 plan is an easy way to get your child off on the journey to financial independence.

For your convenience, we have provided a chart below with links to the related State 529 plan. Continue on your journey to financial independence. 

States of the United States of America
and Washington, D.C. 529 Plans		Abbreviation
AlabamaAL
AlaskaAK
 ArizonaAZ
 ArkansasAR
CaliforniaCA
 ColoradoCO
 ConnecticutCT
 DelawareDE
FloridaFL
GeorgiaGA
 HawaiiHI
 IdahoID
 IllinoisIL
IndianaIN
IowaIA
 KansasKS
KentuckyKY
 LouisianaLA
MaineME
 MarylandMD
 MassachusettsMA
MichiganMI
 MinnesotaMN
Flag of Mississippi ("New Magnolia Flag").svg MississippiMS
 MissouriMO
MontanaMT
 NebraskaNE
 NevadaNV
 New HampshireNH
 New JerseyNJ
 New MexicoNM
 New YorkNY
 North CarolinaNC
 North DakotaND
 OhioOH
 OklahomaOK
 OregonOR
 PennsylvaniaPA
  Rhode IslandRI
 South CarolinaSC
 South DakotaSD
 TennesseeTN
 TexasTX
 UtahUT
 VermontVT
 VirginiaVA
WashingtonWA
 Washington, D.C. (District of Columbia)DC
 West VirginiaWV
 WisconsinWI
 WyomingWY

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Saving Money Starts Now

Saving Money Starts Now

Money Maroon

Saving money begins with first having at least one income stream. Second, saving money requires spending less than your income, not spending in excess and doing so consistently over time. Saving is the first step towards financial independence and while saving money is a simple concept, consistently saving over time is difficult for many.

Assess Your Current Financials

If you truly would like to begin saving money, it is important to know where you are financially. It is important to take stock of your financials right at this moment. It is time to know what your monthly expenses are and how much you are bringing in each month.  By making a list of your monthly income and monthly expenses, you get a clear picture of why you are getting in debt or not saving enough.

Determine How Much You Can Save

When it comes to saving money, the math will never work if your expense are higher than your income. Once you make a list of your monthly income and your monthly expenses, it is time to take a close look at your list of monthly expenses. Now ask yourself, what can be reduced or cut out? It may be: moving to a smaller home to reduce rent/mortgage, moving closer to work to reduce the cost of commuting, bringing your lunch to work, stop/reduce eating out, cut your cable or other subscription costs. Make your list, however, whatever the cost cutting measure may be, it is important to review your list of expenses and be honest with yourself. While it is great to say that you will cut or reduce your expenses, you must be able to actually implement your plan of reducing cost.  

Increase Your Income

Now, turn to the income side of your list. How can you increase your income? This increase need not be immediate, but must be doable. For example, you can request a raise, change jobs, invest in your education and return to school/learn a skill to get a better position or research a side hustle that may provided additional income? The goal is to increase your income such that your income is higher than your expenses.

Begin Saving Money

Once you are able to get your income higher than your expenses, you have done the hard work and you are 90% there. But you must take the next critical step and perform the act of saving money. Now that your income is higher than your expenses, you must save that money. Many fall into the trap of spending their disposable income each month. Do not fall into this trap, remember, your goal is not to simply reduce your expenses and increasing your income. Your goal is to save money. So save your money.

There are a number of tools available that facilitates saving money. For example you can automate your savings by automatically transferring money from your pay to a savings account or you may save in a high yield savings account that provides higher interest rates than the typical brick and mortar banks. Research the options available to maximize and grow your savings. Further, to consistently save, while it is not required, a budget may provide a financial guide.

Saving Money And Your Future

Now that you are saving money, do look towards the future and your financial health. Look to paying off debts, investing, and contributing to your retirement. Saving is only the first step on the path to growing financially and financial independence.

Conclusion

Saving money begins with first having at least one income stream. Second, saving money requires spending less than your income, not spending in excess and doing so consistently over time. Saving is the first step towards financial independence and while saving money is a simple concept, consistently saving money over time is difficult for many. Take your first steps to financial independence today.

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Start investing

How To Start Investing Now

Money Maroon

On the journey to financial independence, you will need to save and invest. Once you have saved for your emergency fund, the question is, how to start investing? You start by first investing in yourself. Whether this is by investing in your education to obtain a better job/career option, or doing your due diligence to make appropriate decisions. Investing in yourself is the key to success.

Investing in your future is an extension of investing in yourself. Once you begin to look to the financial markets, when asking how to start investing, look to learning more about the opportunities that are available to you. Educate yourself.

How To Start Investing For Retirement

No matter your age, you should begin thinking about your retirement and related investment options. In thinking about your retirement, you will no doubt hear about traditional IRAs, roth IRAs, SEP, roth 401Ks, 401Ks, 403Bs, 457Bs and TSPs to name a few. Do not simply get lost in the alphabet soup of different retirement plans. Do your due diligence. An investment in your retirement plan education is invaluable to your financial future.

Your retirement plan will depend on (1) whether or not you are an employee vs self-employed and (2) whether or not the retirement plans are employer sponsored or self controlled. It is incumbent upon you to fully understand the plans  that are available to you, their contribution limits, mandatory withdraw, age of withdrawal, tax position and penalties associated with early withdraws. It is also incumbent upon you to take advantage of any matching benefits provided to you. For example, a 401K match. 

The 401K match provides free money from your employer and is a sure-fire way to achieve financial independence early. Employer 401K match can come in a variety of shapes and sizes. In one instance, the employer will match a portion of your contribution up to a limit. Typically, this limit is represented as a percentage of your salary. Further, an employer may match your contribution if you contribute or irrespective of if you contribute. If your employer provides a 401K match only if you contribute to your 401K, ensure that you are contributing at least up to that threshold. An employer 401K match is free money. Take advantage.

How To Start Investing – Brokerage Account

After establishing your retirement accounts, it is time to begin thinking about other investment options. For example, brokerage accounts. Brokerage accounts are investment accounts that allow you to buy and sell investments such as stocks, bonds, mutual funds, and Exchange-traded funds (ETFs).

There are a number of different brokerage firms where you can set up a brokerage account. These brokerage firms are well known and include Fidelity, Merrill, E-Trade, TD Ameritrade, Robinhood and Vanguard to name a few. Essentially, the brokerage firm is an intermediary that holds your brokerage account and act as an intermediary between you and the investments that you buy and sell.

Once you set up a brokerage account, which is usually free, you will be able to deposit money into that account that you can use to buy investments. Once you begin investing, you can buy and sell investments through your brokerage account. Do your due diligence prior to trading on the different platforms and understand the risk associated. Knowledge is power.

Investing In Education

Once you have done your research and have established your own investment plan, begin thinking about your legacy, your children and their future. Think about a 529 plan. By contributing to a 529 plan, you are able to offset some or all costs associated with a college education. In many States, two 529 plans are available, an investment plan or a prepaid plan.

  • The investment plan allows you to contribute by buying and selling shares offered by the State or the State’s agent (similar to investing in the stock market).
  • The prepaid plan is based on the cost of attending a college. Here, you are prepaying the cost of attendance.

While 529 plans are not deductible on your federal tax filings, many States allow you to deduct a set portion of your 529 contribution from your State tax filings.

How To Start Investing – Caution

Once you have educated yourself and have made the decision to invest for yourself, with a financial planner or with an advisor, you will begin using different investment accounts to your advantage. Pay special attention to the fees and the taxes associated with each account.

One of the biggest item that you should pay attention to is the fees associated with your retirement accounts and the investment options. Whether that is the fees charged by an investment fund, your advisor or related financial professional. 

It is important to remember that over time, fees can cripple your financial growth. While paying 1% of your total investment per year may not seem like a lot when you begin investing, Think long term. Project the number of years until retirement and also the amount of funds that you will have in that account. Paying 1% in fees each year can be a significant detriment to your financial growth, imagine if you are paying more. As always, do your due diligence and think long term in your financial decisions.

Conclusion

On the journey to financial independence, you will need to save and invest. Once you have saved for your emergency fund, the question is, how to start investing? You start by first investing in yourself. Whether this is by investing in your education to obtain a better job/career option, or it is doing your due diligence to make appropriate decisions. Investing in yourself is the key to success. Continue investing by educating yourself about the financial markets, plan and execute your plans.

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Video Summary

Rags to riches

Write Your Rags to Riches Story Now!

Money Maroon

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream of winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. 

The Money Game

No matter how much or how little money you may have today, to build sustained wealth, you must spend less than you earn. This is the only way that you will save. Saving is important because it allows you to build up an emergency fund, it allows you to become prepared for the unpredictable. An emergency fund makes financial emergencies routine life events.

Further, by saving, you are able to have money/funds/assets available such that you are able to take advantage of financial opportunities. 

For example, if the stock market falls, do you have enough money in reservers to ride out the downturn? Are you able to buy stocks at the bottom of the market? In such a situation (financial down turn), many do not have enough in reserves to ride out a market downturn and therefore sell at the bottom of the market and realize financial losses.

If home prices fall, are you able to take advantage by purchasing real estate? When interest rates are low, are you well positioned to borrow at the lower interest rates?

Saving, and having money/funds/assets to take advantage of financial opportunities is necessary to write your own rags to riches story.

Invest In Yourself And Journey From Rags To Riches

With your savings, not only are you prepared to take advantage of financial opportunities, you are also able to invest. You may invest in any vehicle that brings value, for example real estate, the stock market, and yourself. Saving alone will not allow you to complete your rags to riches story, you will need to invest such that your money/assets make money on their own. You will need to invest such that your money works for you instead of you working for money.

On a basic level, any investment that you make after doing your due diligence is an investment in yourself. However, making an active and purposeful decision to invest in your education is a must. Your investment may be in education to increase your knowledge in your field of study/profession or in financial literacy. 

As your money/assets grow, so must your financial knowledge.  If not, you risk regressing and losing what you have worked for. Do not forget, there are equally many riches to rags stories as there are rags to riches stories. You must purposefully manage your money/assets and understand how money works to maintain and grow your wealth. Your financial literacy is important.

The Element Of Luck In Your Rags To Riches Story

Luck is essential but hardly recognized
Luck is essential, but hardly recognized

Luck is essential, but one of the least recognized component of a rags to riches story. Let’s face it, many hate to admit that luck played a role in getting from rags to riches. Most want to attribute all their riches to their own hard work and dedication. This is false. Many toil their entire lives and remain in poverty. While hard work plays a role, luck and the people around you also contribute to your success.

Luck is a matter of being in the right place at the right time. Luck is the convergence of resources and opportunity. What you will notice as a constant theme throughout life is that the harder and smarter you work, the luckier you will be. The harder and smarter you work, the more opportunities will be open to you; the luckier you will be; the more you will find that you are in the right place at the most opportune time. 

Luck requires preparation. You must be ready when the opportunity presents itself, otherwise, your luck will turn into a life changing missed opportunity.

Write your own rags to riches story by playing the money game, investing in yourself and being ready to act when an opportunity presents itself.

Conclusion

We have all heard a rags to riches story. It is now time to have your own story. While we all day dream about winning the lottery, or inheriting riches, most rags to riches stories are not a result of a quick transfer of wealth. The fact is, most rags to riches stories are a result of making difficult, wise and consistent financial decisions over time. Journey to financial independence and write your own rags to riches story.

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Video Summary

Write your rags to riches story!
401K Match

401K Match: Free Money For You

Money Maroon

Prior to accepting a job offer,  you should evaluate not only the salary offer but also the total compensation package. In some cases, a job’s salary may be lower, however, total compensation may be higher in comparison to another job. The reason for this may be the employer’s health care plan, bonus structure, stock option and retirement plan. With regard to a company’s retirement plan, it is important to pay particular attention to whether or not your future employer provides a 401K match.

An employer 401K match means that your employer contributes a certain amount, typically a percentage of your annual salary to your retirement plan. This is in effect, free money. If you contribute to your 401K, your employer does also.

Your Employer’s 401K Contribution

Employer 401K match can come in a variety of shapes and sizes. In one instance, the employer will match a portion of your contribution up to a limit. Typically, this limit is represented as a percentage of your salary. Further, an employer may match your contribution if you contribute or irrespective of if you contribute.

If your employer provides a 401K match only if you contribute to your 401K, ensure that you are contributing at least up to that threshold. An employer 401K match is free money. Take advantage.

Calculating Your Employer’s 401K Match

If we assume that your employer offers a 100% 401K match on all your contributions each year, up to a maximum of 5% of your annual income. If you earn $100,000, the maximum amount that your employer would contribute to your 401K each year is $5,000. 

This $5,000 is typically spread out over the entire year. As such, if you are paid bimonthly, that is approximately 26 pay checks. This means that each paycheck, your employer is willing to match you up to $5,000/26 paychecks, which equals $192. As such, to obtain your full 401K match, you will need to contribute at least $192 to your 401K per pay check.

In the above scenario, if you set up your 401K contribution to contribute at least 5% of your pay to a 401k account, you will ensure that you will get at least the match. However, note that as your salary increases, it is important to ensure that you are contributing enough, but also not too much, such that you are able to obtain your full 401K match.

Ensuring That You Get Your Entire 401K Match

It is important that you monitor how much you contribute to your 401K on a yearly basis. This is important because if you place a high percentage of your salary into a 401K account, you can potentially max out your 401K before your employer hits their 401K match.

In the year 2020, your contribution limits for a 401K is $19,500 (catch-up contribution limit for employees aged 50 and over is $6,500). If your employer’s 401K match is contingent on your contribution, they will only contribute to your 401K if you do. As such, if you hit the 401K contribution limit before the end of the year and can no longer contribute to your 401K for that year, your employer will also not contribute.

To ensure that you will not hit your contribution limit before the end of the year, divide the contribution limit by your salary and multiple by 100. This will provide the maximum percentage of your salary that you can contribute to your 401K without exceeding the contribution limit. In the example above, $19,500/$100,000 = 0.195. 0.195 x 100 = 19.5. As such, with a $100,000 salary and a contribution limit of $19,500, if you keep your yearly contribution at or below 19.5% of your salary, you will not hit your contribution limits before the end of the year. This will ensure that your employer will pay the full match.

Conclusion

Prior to accepting a job offer,  you should evaluate not only the salary offer but also the total compensation package. In some cases, a job’s salary may be lower, however, total compensation may be higher in comparison to another job. The reason for this may be the employer’s health care plan, bonus structure, stock option and retirement plan. With regard to a company’s retirement plan, it is important to pay particular attention to whether or not your future employer provides a 401K match. The 401K match provides free money from your employer and is a sure-fire way to achieve financial independence early. Journey to financial independence by ensuring that you receive your employer’s full 401K match.

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Video Summary

Crushing student loan payment

Student Loan Payment: Attack And Pay Off $200,000

Money Maroon

Once you graduate, you typically have six months before the first student loan payment is due. If you are close to graduation or a recent graduate, it is time to pay attention to what you owe. If you are already into your student loan payment period, it is time to take control. This is a guide to paying off $200,000 in student loans. In this post we assume that you are not participating in the federal loan forgiveness program. We further assume that you want to turbo charge paying off your student loans.

Student Loan Payment: You Do Need A Job

First, secure a job that pays a living wage. Following graduation, you typical have six months before beginning the student loan payment journey. As such, securing a job that pays a reasonable wage will reduce the financial stress associated with student loan payment. Keep in mind that although you have six months to begin student loan payment, you may begin paying back your loans early.

As an example, while in school, you can work and pay down your student loans as you go. This can save a tremendous amount of money as you are able to cut down the interest compounding on your student loans. If you are able to pay down the principal of your student loans while in school, this will further reduce your debt load. For those who are employing or who have employed this tactic, great job. If this ship has already sailed, let’s move on to knowing what you owe.

Student Loan Payment: You Must Know What You Owe

Before graduation, shortly thereafter or now,  begin to review all your student loans. Take a look at how much you owe and the interest rate for each loan. Let me rephrase that, know how much you owe and the interest rate for each loan, write it down. Order your loans from highest interest rate to lowest interest rate. In doing so, you are identifying the loans that will cost the most. The aim here is to attack and pay off the loan having the highest interest rate first, thus reducing the total cost of the loan. The first step is to identify the target loans.

Student Loan Payment: You Must Know Your Minimum Payment

To take control of your student loan debt, you must appreciate your monthly payment. Note what your minimum student loan payment will be for each loan per month for the term of the loan. Next, add together all your minimum payments per month. This is the minimum payment due for your entire student loan debt load per month. Know this number. Ensure that you have structured your life in such a way that you are able to make these monthly payments. It is important to note that the plan is not to pay the minimum student loan payment for the standard 10-year period. However, it is good to know early what these minimum payments are.

Debt Avalanche

Now the plan. Now that you have reviewed all your student loans and you know the total minimum student loan payment per month, it is time to implement the plan. Attack your loan having the highest interest first. Look at your budget, and determine how much additional money you can dedicate to your student loans each month. This amount will be a sum above your minimum payments. The aim is to dedicate this amount (additional money) to your highest interest rate loan while making the minimum payments on your other loans each month. Once your highest interest rate loan is paid off, you can thereafter dedicate the additional money + minimum payment of the highest interest rate loan you just paid off to the loan having the second highest interest rate while maintaining minimum payments for your other loans.

Implementation And Example

As an example, if you have 3 loans, loan 1 having an interest rate of 5%, loan 2 having an interest rate of 4.5% and loan 3 having an interest rate of 4%. Using the above method, you would pay your additional money to loan 1 each month. For loan 1, you would pay loan 1’s minimum monthly payment + the additional amount. For all other loans, you would pay the minimum monthly payment. Once loan 1 is paid off, your additional amount + the minimum monthly payment for loan 1 + minimum payment for loan 2 would be paid to loan 2 while maintaining minimum payments for loan 3.

Using this method, mathematically, you would be paying off your debt more quickly and with less interest.

Additional Tip

Additional  tip,  most loans provide a reduction in interest rate if you sign up for automatic payment. Prior to signing up for automatic payment, ensure that you are able to afford the payment amount. If you are, sign up for automatic payment. This will also reduce your total payment and reduce your payment timeline.

Conclusion

No matter where you are with regard to your student loan payment, it is time to take control. By reviewing what you owe and attacking your student loan having the highest interest rate, you will pay off your student loans more quickly and with the least interest cost. By taking control of your student loan situation, you can turbo charge your student loan repayment and pay off $200,000 in student loans. 

Paying off debt is essential on the journey to financial independence. Start attacking your student loans today.

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Video Summary

Top Secret

Secret To Building Wealth

Money Maroon

Every one wants the secret to building wealth. Many pay for courses or are drawn into get rich quick schemes. But the secret to building wealth is simple. It is the same it has been from the beginning of time. The secret to building wealth is money (assets) and time. That is it. If you do not believe me, continue reading the below.

Building Wealth – Money

Money and as a broader concept, having assets or things of value is the basis of wealth generation. This is no surprise. The old adage of you need money to make money is true. It comes down to simple math. If you begin with a basis of $100 and gain a return of 10%, your return plus your basis is $110. On the other hand, if you have a basis of $1,000,000 and gain a return of 10%, your return plus your basis is $1,100,000. Money matters. Having assets to trade matters.

If you were born wealthy, you have obtained a head start. If you were born poor, you will need to obtain money or valuable assets that are tradable. In some cases, this means having or developing valuable skills that one may trade to obtain money. In other words, employment. 

The above does not mean that those born wealthy will remain wealthy. Having money simply gives you a head start, but what you do with the money you have is important. If you place your money under a bed or receive a low return on your money, inflation will erode the value of your money. On the other hand, if you make smart moves with your money, its value will increase. Rich or poor, if you do not know how to grow and build wealth, you will lose what you have. The more money/assets you have, the faster it could grow over time.

Building Wealth – Time

The secret to building wealth not only includes a need for money, you also need time. Simply put, to build any thing takes time. Wherever you begin on the scale between poverty and wealthy, to build wealth or more wealth will take time. To build wealth, you must invest, you must put your money to work over time. As noted above, if you park your money into a savings account or under your bed, the value of your money is likely to be eroded by inflation.

Once you put your money to work, there will be a time period before you are able to obtain a return on your investment. This time period could range from as little as a few seconds to multiple decades. Whether you put your money to work by investing in yourself in a specific field for example obtaining an education or learning new skills to obtain gainful employment, investing in the stock market, investing in a startup business or investing in real estate, the payout or return on investment takes time. The more time you have, the more your investments may potentially pay off. Consider over the life of your career, the more time you have the more money you will earn, the more you can invest to grow wealth. The more time you have, the more homes you can flip if you are in real estate investing, the more return  you can gain from the stock market, the more startups you can invest in. As such, the earlier you are able to obtain money or tradable assets and begin putting your money to work, the more wealth you can generate.

Examples

As an example of the above, take a look at your favorite wealthy person. Is it a doctor, lawyer, investor or entrepreneur. What do they all have in common? They had money or tradable assets that they  exchanged for things of value that grew over time. In some instances, skills are being traded for a high salary. From the salary, money is saved and invested over time to generate wealth. For others, they had innovative ideas that they initially funded and overtime those ideas grew into ultra profitable companies.

Caution 

As noted before, having money does not mean wealth. Because you now know the secret to building wealth, this does not mean that you will automatically become wealthy. Once you obtain money, how you use this money over time is very important. You may invest in your education in a field that does not pay well or that is no longer needed, which would leave you in debt and struggling. It is possible that you may invest in companies that are not innovative and may later go bankrupt. You may also invest in the wrong stocks or industries. Building wealth takes time and money, but building wealth is not automatic. You must do your due diligence and in some cases be lucky.

Conclusion

Every one wants the secret to building wealth. Many pay for courses or are drawn into get rich quick schemes. But the secret to building wealth is simple. It is the same it has been from the begining of time. The secret to building wealth is money (assets) and time. That is it. Now that you know the secret to building wealth, take steps today to journey to financial independence.

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Video Summary

Money Beyond

Saving The Next $50,000, You Can Do It Now

Money Maroon

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

The Plan – Saving The Next $50,000

Just like enacting any plan that requires a change in habits or direct action, implementation of your plan to financial independence can be difficult. If you choose to save by cutting back on eating out, this will no doubt affect your social life. If you decide to work a side hustle, this will take time from other activities. To journey to financial independence, you will make sacrifices. 

However, by the time you begin saving the next $50,000, you have already made changes and can now use the momentum that you have build up saving your first $50,000 and further optimize your strategy. Because of the habits formed saving your first $50,000, saving the next $50,000 will be easier to achieve.

Your Emergency Fund

By the time you are on the path to saving the next $50,000, based on your lifestyle, your emergency fund may now be fully funded or very close to being fully funded. This is a huge step and should provide comfort for you and your family. Saving 3 months, 6 months, or one year of expenses in your emergency fund is a huge step and you should feel very proud of yourself for achieving this milestone. Further, you should be motivated by the fact that you can do it. You can do this. The steps taken to financial independence is paying off.

You got this
You Got This!

Once you have achieved a fully funded emergency fund, do not stop saving. Continue the same habits. Do your homework, research and optimize your plan. Achieving financial independence takes time and consistency.

Once you have fund your emergency fund, instead of putting money into an emergency fund, you are now able to contribute that money to another area of your plan. Will you be contributing more to retirement, paying down debt if you still have debt, or invest?

Contributing To Retirement

Once you begin to save, you should attend to your retirement fund, especially if your employer is providing a match. No matter how little you may contribute, contribute to your retirement. 

Now that you are saving the next $50,000, begin to increase your retirement contributions, especially if you have already paid down debt. In the year 2020, your contribution limits for a 401k is $19,500 (catch-up contribution limit for employees aged 50 and over is $6,500). The contribution limits for an IRA is $6,000 ($7,000 if you’re age 50 or older). As such, you are able to put away $25,500 ($33,000 if you are aged 50 or older).

On the path to financial independence, by consistently contributing to tax advantaged retirement accounts, it is possible to join the 401k millionaire club.

Paying Down Debt

Once you begin to save, you will  also need to attend to debts. You will definitely want to keep your accounts current by paying at least the minimum. Once your emergency fund is fully funded, it will be time to pay more than your minimum. 

Remember, the best way to obtain a 16-18% return (the average interest charge on a credit card), is to pay off your credit card debt.

It is advisable to pay down debts having the highest interest rate. This will lower your interest payments as you pay down the debt. Another approach is to pay down the smallest debt first, such that you have a snow ball effect of paying the least balance to highest balance. The method used here is up to you. Which method will motivate you to pay down your debts faster?

Paying down debt in the early stages of your journey to financial independence typically provides the greatest early return. Paying down debt yields exponential benefits as it frees up funds for contributing to retirement and investment accounts such that you are able to take advantage of the power of compounding.

Ride The Wave – Saving The Next $50,000

As you are able to fund your emergency fund, pay off your debts, and contribute to your retirement, you will begin to have more funds available to further your race to financial independence. The funds that went to your emergency fund can be used to pay down debt, contribute to retirement fund, and/or invest.

Do not feel the need to “reward your self.” You do not want to fall into the trap of lifestyle creep/lifestyle inflation. You do not want to raise your standard to living as you earn more/have more disposable income. There are lots of folks who save the same amount when making $100,000 as they did when they were making $50,00. If you follow this path, this will be a detriment to your ultimate goal of financial independence. 

As your income/disposable income increases, the amount you save/invest should be increase as well. Live below your means, and journey to financial independence.

Conclusion

On the journey to financial independence, each milestone is fuel for the next. One of the greatest initial milestone is that of accumulating funds over time. Once you have accumulated your first $50,000, it is time to think about saving the next $50,000 and beyond.  The biggest step on your journey to financial independence is the step you take today. Take the next step.

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