Not surpisingly, student loans make up a majority of the debt for 19-29 year olds. Reflective of this is that while mortgage debt is only up 3.2%, student loans are up a staggering 102%.
Ah, your “roaring 20’s”. What a care free time that was, right? Finishing up college, entering the working world, perhaps even just starting to (hopefully) dabble in investing in your 401(k). Once you hit 30 though, it can become a whole new ballgame. You may already be budgeting for a lot of these, but even if you are, it can still be a solid reminder to keep these as part of your financial plan.
While talking about life expectancy can be a tough subject, it can also be extremely useful in financial planning for your retirement. Recent studies into the financial habits of American families reveal that less than one quarter of persons over age 50 have written up a projection of their expected retirement income and expenses. Inside are some ways you can avoid being that statistic.
Are you looking for some passive income ideas for your money? Look no further. While it might seem there is never enough time in the day, one of the great things with money is there are ways you can get your accounts to grow without even hardly the lift of a finger.
[video width="1920" height="1080" mp4="https://script-notes.com/wp-content/uploads/2018/06/5WTS-While-Doing-Laundry.mp4"][/video] Doing laundry. It's a fact of life, especially if we want clean clothes. It can also be one of the largest sources of electrical or other utility expenses for your home. It doesn't have to be that way though. Consumers Energy provides some good common sense tips to help a little bit in your bid to save on energy:
Run full loads. You'll save energy and water by reducing cycles.
Clean the lint filter in your dryer before each load to improve air circulation.
Inspect and clean the dryer vent periodically. Better air flow means more efficient drying.
Hang laundry to dry. Hang clothes outside to dry on nice days, or hang them inside when the weather is not so nice.
Use ENERGY STAR® rated washers and dryers. They use less energy and water than standard models. Consumers Energy (as well as other energy companies) can offer rebates up to $50 for an ENERGY STAR washing machine.
Who has heard of the 529 plan?
Whether you’re the parent of a newborn, or your little one is in elementary or perhaps even making their way through middle school, there is no time like the present to start saving for college.
Many may think that just a regular savings account would be sufficient to start saving for tuition and textbooks. However, there is another investment vehicle that you can use to get rolling. Similarly to how one can stash away funds for retirement in an IRA, those wishing to save and invest funds for college can choose the 529 plan. Read on for more.
What is a 529 plan?
According to the SEC, “a 529 plan is a tax-advantaged savings plan designed to encourage saving for future college costs. 529 plans, legally known as “qualified tuition plans,” are sponsored by states, state agencies, or educational institutions and are authorized by Section 529 of the Internal Revenue Code.”
There are two types of a 529 plan, prepaid tuition and college savings plans.
The SEC states “prepaid tuition plans let a college saver or account holder purchase units or credits at participating colleges and universities (usually public and in-state) for future tuition and mandatory fees at current prices for the beneficiary. Prepaid tuition plans usually cannot be used to pay for future room and board.”
Generally most prepaid tuition plans receive sponsorships from state governments and can also contain residency requirements for the one who is saving for college or the beneficiary. It is important to note that these types of plans are not guaranteed by the federal government. Some of these state governments will guarantee the money that you put into the plan, however others will not. That being said, the importance of checking your individual state’s guidelines cannot be stressed enough. For example, if your investments are not guaranteed by your state, and the plan’s sponsor should go broke or have some other sort of shortfall, then you could lose some or all of your money.
College Savings Plans
With this particular plan, “a college saver can open an investment account to save for the beneficiary’s future qualified higher education expenses – tuition, mandatory fees and room and board. Withdrawals from college savings plan accounts can generally be used at any college or university, including sometimes at non-U.S. colleges and universities. A college saver may typically choose among a range of investment portfolio options, which often include various mutual fund and exchange-traded fund (ETF) portfolios and a principal-protected bank product. These portfolios also may include static fund portfolios and age-based portfolios (sometimes called target-date portfolios). Age-based portfolios automatically shift toward more conservative investments as the beneficiary gets closer to college age.”
Almost on the opposite end of the spectrum, all college savings plans ARE sponsored by state governments and only a few have residency requirements for the saver or the respective beneficiary. It is also worth noting that state governments do not guarantee investments in college savings plans.
Also worth noting is that college savings plan investments within mutual funds and ETFs do not get federally guaranteed, however, should you make some of your investments in some principal-protected bank products, those may be insured by the FDIC. Don’t forget too that similarly to most investments, investments within college savings plans have the potential to not make any money and could lose some or all of the money invested.
As an added bonus, investors saving for college within a 529 plan may also get additional tax benefits. Of course, make sure you understand the tax implications of investing in a 529 plan and consider whether to consult a tax adviser.
One perk is that many states will offer tax benefits for contributions to a 529 plan. Benefits can include deducting contributions from state income tax or matching grants. However, college savers may only be eligible for these benefits if investments are made in a 529 plan sponsored by that specific state of residence.
Also when it comes to 529 account withdrawals for qualified higher education expenses, earnings in the 529 account are not subject to federal income tax and, in most cases, state income tax. If 529 account withdrawals are not used for qualified higher education expenses though, they will be subject to state and federal income taxes and an additional 10% federal tax penalty on earnings.
While there are certainly other options for saving for college out there, if managed properly, the 529 plan can be a great investment vehicle while saving for your child’s college expenses. If you would like to learn even more, the SEC offers up additional information and circulars for your reference to see if this might be a good fit for you and your family.
Ah summer, you can hear the birds chirping, the bees buzzing, fresh cut grass, and the shopping malls a callin’. The sweet freedom of summer. Hold up. That last part, the shopping malls a callin’. While your favorite retailer is probably hoping you’ll be more than ready to drop that hard earned cash this summer in their store, did you know that with a little planning, there could be an even better use for that money? Compound interest. Read on to find out more.
Perhaps you have never stepped foot in your local bank or credit union, or on the flip side, maybe you are actively saving and investing for your future. Regardless, remember with little effort and patience, there’s something you may have heard of before that can help you better utilize that cash called compound interest.
Compound Interest - Saving Your Way to Millions
Compound interest - probably sounds complicated on the surface, right? Guess what though? Compound interest is what is going to help you get on the fast track to being a millionaire. It’s actually free money! Still not sure what to think? Just check out this example of Ben and Arthur via DaveRamsey.com to get just how much compound interest can help you in your savings journey for your summer job this year and go forward.
Ben and Arthur were friends who grew up together. They both knew they needed to start thinking about the future. At age 19, Ben decided to invest $2,000 every year for eight years. He picked investment funds that averaged a 12% interest rate. Then, at age 26, Ben stopped putting money into his investments. So he put a total of $16,000 into his investment funds.
Now Arthur didn’t start investing until age 27. Just like Ben, he put $2,000 into his investment funds every year until he turned 65. He got the same 12% interest rate as Ben, but he invested for 31 more years than Ben did. So Arthur invested a total of $78,000 over 39 years.
When both Ben and Arthur turned 65, they decided to compare their investment accounts. Who do you think had more? Ben, with his total of $16,000 invested over eight years, or Arthur, who invested $78,000 over 39 years?
Believe it or not, Ben came out ahead . . . $700,000 ahead! Arthur had a total of $1,532,166 while Ben had a total of $2,288,996. How did he do it? Starting early is the key. He put in less money but started eight years earlier. That’s compound interest for you! It turns $16,000 into almost $2.3 million! Since Ben invested earlier, the interest kicked in sooner.
Pretty sweet, eh?
So here’s what you can do now. Your goal is to get going AS SOON AS POSSIBLE. If you need help, reach out to your parents or teachers about how you can open a long-term investment account so you can get on your way to being a millionaire, too! Finally, remember, the longer you wait, the less money there will be waiting for you at the finish line, so get rolling!