How to Pay for College

How to Pay for College

Nov 6, 2020

  Too cute for student loans.

 

Q: “How do you advise those who need to pursue higher education for their desired career path but do not have financial assistance options other than student loans and need to get their post grad degree done?”

 

Does your employer offer tuition reimbursement as a benefit?

Have you looked into scholarship options?  My understanding is that there are more scholarships for undergrad than for graduate, but I would look into it before ruling this out.  Often scholarships go unclaimed because no one applies for them, so get creative.

Have you talked to the admissions and financial aid people at the school of your choice?  Do they have any suggestions?

Are you taking the classes ONLY so you can make more money?  If so, have you confirmed that the additional pay is real?  I have friends who graduated from law school and really don’t make much more than they would have with a Bachelor’s degree.

Honestly, I have not gotten a MBA despite an interest in it because I can’t see any ROI for me as an entrepreneur.  

Student loans suck.  Not getting the degree you want because you don’t have the money to pay for classes also sucks.  

If you have thoroughly investigated the options and thought it through and you just want to do it, then just do it and accept the consequences of debt and be thankful that not having cash to pay for classes doesn’t completely shut you out of being able to pursue this program of study.  Sometimes we make these choices.  

Oh, if you are REALLY looking for creative ideas, I hear university is free in Germany (and yes, you can find classes in English) although I don’t know if this applies to post-grad and I don’t know if you are up for that much adventure.

Are you ready to improve your finances?  Let's talk live to see if you'd be a fit for one of my programs. Schedule a call at https://lisaduke.net/schedule 

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Will Closing Credit Cards Mess Up My Credit?

Will Closing Credit Cards Mess Up My Credit?

Oct 30, 2020

We love our credit scores.

Here are two sets of questions and answers related to cutting back on credit from a recent presentation I did.

 

  • Suggestions for unloading ‘available’ debt without it negatively impacting credit score.

I’m interpreting this question to mean “I have a lot of credit cards and want to close some of them as I pay them off.  Will this hurt my credit?”

Let’s say you have 5 credit cards.  4 are maxed out and one is paid off.  If you immediately close the paid off one, you will reduce your access to available credit, which means you will be using a higher percentage of your available credit, which yes, will ding your credit.  My suggestions are

  1.  Worry less about your credit score -> https://lisaduke.net/your-credit-score-is-not-your-adult-report-card/
  2. Understand that “if you are using a lot of your available credit, this may indicate that you are overextended—and banks can interpret this to mean that you are at a higher risk of defaulting.” https://www.myfico.com/credit-education/whats-in-your-credit-score

So a good compromise would be to keep paid off card 5 open while you pay off card 4.  Then close card 5.  Once card 3 is paid off, close card 4.   Something along those lines so you always have a bit of available credit but you can still reduce down your temptations for yourself (or for potential fraud!).

  •  I just paid off my first credit card (yay!) and I've heard mixed information on how to manage that account. Should I close the account, purchase something like gas and then pay it off once per month, etc.?

Wooohooo!!!!!!

If you have more than 2 credit cards, eventually yes, I’d close it – just keep an idea on your debt utilization ratio (see link to FICO above) so you don’t close it off and make it so you have no access to credit.  In the meantime, using it twice a year or once a quarter should be enough to keep the bank from closing it on you before you are ready.

When you do use it, yes, I’d pay it off in full.

Are you ready to change your financial life?  If so, I can help.  Schedule a time to talk to me about options for working together at https://lisaduke.net/schedule

 

Wellness-inspired Wealth Ideas

Wellness-inspired Wealth Ideas

Oct 27, 2020

Tips from the health world to help with wealth.

 

Q: “I love how you related your financial plan to a wellness plan! So my question is: what are some examples of weekly goals/small steps we can take towards paying off debt, saving, and a sustainable budget plan instead of jumping all in and giving up after a few weeks/months?”

A:  Uh oh I started with the metaphor, so now I have to keep the metaphor going.  Ok, I’ll give it a try. 🙂

 In my mind, losing weight is basically eat less, exercise more.

Getting out of debt is basically spend less, save more.

 So some eat less ideas – eat less calorie dense foods.  Money version – buy less money dense stuff.  So if you are going to buy clothes, can you buy on consignment/pre-owned?  Honestly, if I donate at The Salvation Army/Goodwill I usually then park and go in to see what I can find.  🙂  

 You might also cut out snacks to reduce your total calorie intake.  What shopping are you doing that is the money equivalent to snacking?

 Food version – maybe only go to a restaurant once a week.  Money version – only go to Target once a week.  Actually, only going out to a restaurant once a week helps with your weight loss and your money saving goals, so that one counts double!

 I think it comes down to knowing where the money leaks are.  If you do the 30 days of spending, you’ll notice the patterns.

 And it’s tradeoffs, right?  Buying vegetables is cheaper than buying pre-made salad, but my time is valuable, too.  It’s a balance.

 The biggest thing is breaking the big spending habits like restaurants, shopping for fun, and buying stuff on credit.  One of the few good things about the pandemic is that a lot of our habits got interrupted anyway, so it’s a good time to make changes.

 There’s not a fitness analogy here, but RENT stuff.  You don’t need to buy the boat/jetski/vacation house/ski equipment if you don’t use it all the time.  Once of the biggest mistakes we make is buying stuff we use very infrequently and could easily rent instead.  This is a mindset shift if you are in your 40s, as the sharing economy didn’t really exist when we were coming up and getting our patterns set.  Ask a millennial for ideas.  🙂

Are you ready to change your financial life?  If so, I can help.  Schedule a time to talk to me about options for working together at https://lisaduke.net/schedule

 

What Are the Recommended Tax Havens and Investment Ideas?

What Are the Recommended Tax Havens and Investment Ideas?

Oct 23, 2020

  Finding the super secret deal.

 

Q:  “What are the recommended tax havens or investment ideas?”

 

A:   It's good you asked.  There are many special tricks that rich people are hiding from you that we use to get rich without any work, time, or sacrifice.  But now that you have asked, I am required to reveal them to you!

1.  Max out your retirement plan.  Not only can you legally avoid paying taxes on that income, you may get free money from your employer in the form of a match.  If it's a dollar for dollar match, that means a guaranteed doubling of your money!  There's no better guarantee in the world of investing!!

I know, that's not what you wanted to hear.  It's super boring, right?  You already knew about all of that, right?  That can't possibly be it!

Only it is.  Most of the people I know who are self-made millionaires got their start doing exactly this.  I'm so sorry to disappoint you.

The good news is like Dorthy in the Wizard of Oz, the secret you are looking for you've had all along.  You knew you were supposed to be putting money in your retirement plan, but ARE YOU?  🙂

If you get into real estate investing you can shelter some income that way, but that’s graduate level stuff.  Not because you aren’t smart enough to do it now, but because there is a huge learning curve that will probably include financial setbacks and there can be unexpected expenses with a physical asset (property).  Do that AFTER mastering all the basics as real estate is an investment you may have to “feed” and so you need plenty of extra money to do that.

Are you ready to change your financial life?  If so, I can help.  Schedule a time to talk to me about options for working together at https://lisaduke.net/schedule

 

 

 

 

 

 

What Do I Do With Cash?

What Do I Do With Cash?

Oct 20, 2020

Q:  “For things like bonuses or tax returns where we get some money back- should we put it into savings and/or an emergency fund, or pay off debt in a chunk to get ahead on a repayment plan? Can you give a list of priorities again for the debt/savings that are recommended?”

 

A:  The first step is to make sure you’ve stopped making new debt – otherwise you’ll find yourself in this same place next year!

I recommend Dave Ramsey’s order of operations for the first 3 baby steps:

  1.  Baby emergency fund (so if something happens you can use cash and don’t have to use your credit card)
  2. Pay off all high rate unsecured consumer debt (like credit cards) while staying current on everything else
  3. Emergency fund

 Beyond that, I’d look at the interest rate on the debt and your level of risk tolerance/comfort with the debt.  If your student loan is a 4% and the market is at 7%, maybe you chuck it at the market and keep making payments on the student loan.  But if the student loans keep you up at night, it can be worth chucking money at them to get it over with.

Personal finance is a balance between what makes sense mathematically and what makes sense emotionally.  Take both into consideration.

Once you have the debt situation under control, you should be looking at retirement investing in your company plan as the next priority if you are not doing that already.

Are you ready to change your financial life?  If so, I can help.  Schedule a time to talk to me about options for working together at https://lisaduke.net/schedule

How to Know Which Business Idea Will Work

How to Know Which Business Idea Will Work

Oct 16, 2020

  This guy has the right idea for his business, right?

 

If you are considering starting up a business, how do you know which of your business ideas will be best?  Within an existing business, how do you know which new idea will work?

 

So…. the bad news is, you don't know.  You won't know.  In fact, even some of the best run companies in the world get it wrong.  They have fails and flops.  Anyone out there old enough to remember New Coke?  Enough said.

 In the investing world, the flop mutual funds might just be shut down or merged with another fund with a better track record, but if you try to start up a business without experiencing any failure… it ain't gonna work.

Sara Blakely, Atlanta-resident and Spanx founder, talks frequently about how her father used to encourage the kids to try, to fail, and to talk about the failures.  By de-stigmatizing failure, he freed her to experiment without feeling like everything would be destroyed if things didn't go her way.

The good news for those of you in IT is that you are uniquely prepared for how to figure out which business idea is best – you test.  That's right.  You tell everyone about what you are doing and see who goes for it.  You run two ad campaigns on the same site, each to half of the audience, and see which one sells more.  The way you decide the winner between competing ideas is that you test.

And how else could you do it?  Think of a great new product?  Ask your clients if they will buy it.  Think of a great new service?  See if anyone you know wants it.  Throw it out there and see what people think.

And let me be clear, perfectionists – I'm NOT saying that you work on your idea in sneaky private and then launch it fully baked into the world. I'm saying offer something, and build the course once people say they want it.  Call it a pilot or a beta and build it as you go.  Why bother perfecting something people don't want?  Figure out what people want and then go build it.

In the IT world we have something called a proof of concept, where you just get the thing working and see if it's good.   In business we have a similar concept – the minimum viable product.  Get your course outline together so you can sell it and see what the market thinks.  Polish and perfect as you go.

I've been doing this with my investing course.  I had a guy I worked with for six months teaching financial education during his gap year.  My plan was to teach him financial basics, but I realized two weeks in he'd actually learned a lot from his parents and a class he'd taken in high school.  So I set that plan aside and spent several weeks teaching him investing.  I outlined the whole class and researched each topic in depth the week before I taught it.  I had the basic understanding from my personal experience and prior studies, but I really soaked in it for the week before I taught a topic.

After that, I realized I enjoyed teaching investor education (a topic that is often made to sound very complicated and difficult in order to make room in the field for well-paid professionals who also may not know much other than how to gather assets).  So I took that outline am teaching the class one on one again.

This time through I'm reordering the topics so the content flows more smoothly and makes more sense.  I'm fleshing out the content so instead of an outline, it's an actual book with chapters.  By the time I finish teaching it a second time, I'll have a deliverable – a handbook to investing I can give to clients.  I can then record that material as classes and have a stand alone course.

Don't be afraid to launch, flop, and launch again.  Eventually you'll land on the offering that resonates with your audience.  And you'll learn a lot along the way.

It’s Not Worth Having A Side Hustle Because Taxes, Right?

It’s Not Worth Having A Side Hustle Because Taxes, Right?

Oct 13, 2020

Question:  “With side hustles…isn't there business tax obligations??  I'd love to have one, but turned off by having tax obligations/having to open an actual business…“.

If you want me to go bananas tell me you aren’t doing something in America right now because of taxes.  Taxes for nearly everything are at historical lows.  Taxes right now shouldn’t be a barrier for much of anything.

There are tax obligations to having a job.  You would save more in taxes if you didn’t have a job, right?  Same idea.  

Never let the fact that the government gets a tiny percentage of your income stop you from getting more income.  You always come out ahead by earning more money.  

To keep your costs low, just start your business and pay nothing for a few weeks until you make your first few hundred bucks.  This is called a DBA (doing business as).  It’s not wise to do that long term, but it’s wiser to do that and use the money you earn to finance getting set up and paying the business taxes (such as they are) than to let not having a few hundred dollars to cover the taxes stop you from starting.

The taxes associated with a business are negligible in my experience.  It’s also like saying “hey, there’s 6% sales tax, so don’t buy anything”.  If you can’t cover the 6% tax, you shouldn’t buy the thing, but usually the tax is the least of your concerns.

The next question I’d have is what business taxes are you referencing?  A S-corp or a LLC (the most likely small business structures) pay zero dollars in federal income tax.  So that shouldn’t stop you.

You will have to register your legal entity with the state, and you’ll likely pay a little for that.  I couldn’t remember how much it was for Florida, but a LegalZoom article says around $100, and that sounds about right. You can ask Google about your state.

You should also get a business license with your city (if you are inside the city limits).  If you are outside the city limits, you should get a business license with the county.  Ours here in Florida was less than $30 (I believe $28.50 to be exact).

In Atlanta we did have to pay a tax each year based on revenue.  It was about $650 for about $500,000 in revenue and went up if you earned more and down if you earned less.  I don’t think this exists in Florida.

If you REALLY want to start a business and REALLY are worried about taxes, call any CPA that does small business returns in your area and ask them what the usual tax burden is there.  You will probably pay more for the CPA to help you with your business tax return than you will pay in business taxes in a year.

If taxes were so high as to stop all businesses from being viable, there wouldn’t be any businesses where you are.  🙂

If you just don’t want to start a business that’s ok – there are side hustles where you could be a part time employee.  A side hustle does not have to be a separate business. 

If you just don’t want to side hustle, that’s ok too.  Are there ways you could be more valuable to your current employer?  What would you need to do to move up/make more in your current role?  Is there a different job within your current company you could do to earn more? 

Companies are almost always looking for good sales people, and it almost always pays well, but people usually won’t do it because it is scary and uncomfortable.  I can appreciate that.  It’s totally fine to pick being comfortable over making more money, but I think it’s important to be honest that we have the power and are choosing not to use it rather than feeling like victims like there are no options for us.

There are lots of ways to earn money, your brain just isn’t wired to look for them yet.  Keep at it and you will start to notice opportunities.

It’s totally ok to just not choose to do something, but taxes shouldn’t be your reason.  It’s even a great time taxwise to die as estate taxes are at historical lows.  Not that I’m recommending that as a money making strategy – it’s definitely not a long term plan. 🙂

How Much Cash Should I Have?

How Much Cash Should I Have?

Oct 9, 2020

Question: “When it comes to cash vs bank accounts, how much cash do you recommend keeping on hand?  Are high yield savings accounts these days without a lot in them truly worthwhile?”

Answer: In bank accounts I recommend 3 months of expenses for dual income households, 6 months of expenses for single income households, perhaps a bit more in downturns, but not much more than that.  Beyond the emergency fund and any short term savings goals your money should be invested so that inflation doesn’t eat up the buying power.

Actual paper money at home  – ohhhh yes.  This is a Zombie Apocalypse question.

 In general your money is safer in the bank, but it’s good to have some cash on hand in case of a disaster (power is out so the stores can’t run credit cards, you are doing a Thelma and Louise style run for the border and don’t want the cops to trace your debit card transactions, etc.)

 I’d say a few hundred dollars in $20s depending upon how secure your house is, how trustworthy your roommates are, and how certain you are that the dystopian future your favorite young adult novel or movie has warned us about is upon us.

 We have a safe and keep some cash there.  If I didn’t have a safe, I’d keep less at home.

I don’t recommend buying the small lockboxes and putting all your valuables in that.  You are just concentrating all your valuables in a to go box that people can crack into later at their own convenience.  When I say “safe” I’m talking about something that is bolted to the floor – obviously not an option for renters.

The savings account rates right now are very low.  My parents remember the rates in the 70s and 80s and keep expecting rates to “come back”.  I don’t think it’s happening any time soon, and if it does, rates on debt will likely go up too, so we have to be careful what we wish for.

Personally, I keep my emergency fund right next to my main checking account at my credit union.  That way if there’s an emergency I can access it easily.

I would keep at least one month’s expenses in checking and/or savings so you can get at it quickly.

If you are keeping a lot of savings and want to keep the majority of it someplace else to get a slightly higher rate, you can.  It’s up to you if it’s worth the hassle.  If it helps you keep your hands off it and pays out a little higher it can be worth it.

CDs are a thing (ask your credit union or bank), but I don’t know that it’s really worth it to lock your money up for a tiny bit more interest.  I wouldn’t do this with your emergency fund, as it needs to be accessible.  

Another option is money market funds, which probably pay a bit more than your checking or savings accounts, and might be a way to get you comfortable with opening a brokerage account.  But they aren’t super exciting, either.

The best approach is to think of your emergency fund as insurance.  You generally don’t worry about getting paid interest on car insurance – you just pay it and then when you crash your car it’s there.  Same idea.

 If you want to earn money on your money, that’s what you do with your EXTRA extra money, after your savings.

 

 

 

Financial Wellness is Part of Corporate Wellness

Financial Wellness is Part of Corporate Wellness

Oct 7, 2020

Your corporate wellness program isn't complete if you aren't including financial wellness.

 

According to DigitalHRTech.com 69% of workers are stressed about their finances and 72% are worrying about their personal finances at work.  

Financial stress is real, and it is a growing problem for many employees.  Today's young workers are coming out of college with record-breaking student loan debt, and older workers are often still paying off their own college loans (especially if they went back for additional degrees) while worrying about paying for a child's education.

 In addition to student loans, many employees have staggering amounts of unsecured debts a rates above 25% interest.  Credit cards get refinanced into personal loans and then the credit cards get charged back up again. 

The pandemic has added to the stress.  While your employees may not have been affected, if a spouse has been laid off our had to quit work to supervise children who are now being homeschooled, many people are under extreme financial stress. 

If your normal corporate wellness and employee appreciation events have been cancelled due to coronavirus, bringing financial education in to supplement what remains in your program can be a great way to support employees. 

Most of us did not learn about money in school or at home, and we are ill-equipped to deal with today's problems.  In addition to helping employees reduce stress, helping employees live well on the money you pay them may reduce their tendency to ask for raises as a way to cope with credit card bills, saving you money on compensation. 

I am currently offering a package of 4 classes on the topics of debt and budgeting, saving and money mindset, risk management, and investing education to help employees reduce financial stress and feel more in control of their finances.  The classes can be recorded for those who are unable to attend or for future hires. 

Additionally, clients have the option to include a package of one on one financial coaching sessions or a single sample session to help their employees work through personal issues that they don't feel comfortable raising as a question in front of a group.

When employees are able to reduce and resolve their money struggles, they are less distracted and less stressed while they are working with your other employees, your vendors, and your end customers, which means everyone will have a better experience with your brand.

If you'd like to receive a proposal for financial education to include as part of your corporate wellness program, schedule a call with me to learn more.

 

How Much Cash Should I Have?

The Capacity to Have

Sep 26, 2020

If I gave you a million dollars and told you to hold on to it for a year, could you?

 

 So first and foremost, hat tip to Brooke Castillo for the concept of capacity to have. 

With that out of the way, let's start at the beginning.

Imagine I came to you with a goldfish and asked you to hold the goldfish for a year and then give it back to me.  Could you handle it?

There might be some immediate panic – I don't have any fish food, I don't know how to take care of a goldfish – but with a quick Google search and a trip to the pet store for food you could probably figure it out, right?

Now, what if I gave you a puppy?  Or a baby?  Same thing, right?  Some immediate panic, a bit of research, and then yeah, sure, you could probably hang on to a baby for a year without giving it away, right?

 

What if I gave you a million dollars?

 

What if I said, hey, here's a million bucks, hang on to it for a year, take care of it, and then give it back to me.  Could you handle it?

 

Would you know the tax implications?  How to invest it?  Where to put it?  You know, you can't just stick it in a savings account, because it exceeds the amount of FDIC insurance, so if the bank shuts down, it could get wiped out.

 

More importantly, would it bug you?  Would it be like an itchy sweater?  Would you want to use some of it to pay off debt?  Maybe just $10,000 to pay off your credit cards?  And then you could put that $10,000 back before I notice at the end of the year, right? 

Do you have the capacity to have a million dollars?

If you wanted a puppy, I would hope that you'd start doing some research.  You'd think about what kind of dog you want and why.  You'd think about where the dog would sleep and if you need to fence in your yard.  You'd call a friend who has a dog and ask for advice.  You'd start looking in to it, because you believe in your capacity to have a puppy.

Do you believe in your capacity to hold a million dollars in your hand and not immediately spend it or pay off your debt or give it away or do something else to relieve the itch – the discomfort of having it?

Oh, you think, it's not right to have a million dollars, so I don't need to develop that capacity.  I don't need to learn about investing or how to reduce my tax burden or how to hold money without blowing it.

But actually, you DO need to have the capacity to hold a million dollars in your hands and not do anything with it, if you plan to retire.

Based on the 4% rule, you'd need to have $1,000,000 in your account for that to translate to $40,000 in income per year – the most you could take out and know that it would last you through a 30 year retirement.

This feels weird and awful and uncomfortable because it is not something that our ancestors had to do, so we don't know how to do it.  In the past, older people would just live with their children when they got old, or they would get lifetime income from their former employer.  As long as their former employer had the capacity to have $1,000,000 on their behalf, our ancestors did not have to deal with the discomfort of having it.

But the financial rules have changed.  This is something we must learn how to do, if for no other reason than to teach the next generation.

Work on developing your capacity to have a million dollars and prepare for it to come to you just as you would prepare before getting a puppy or having a baby.  It's within the realm of possibility for you.  Beyond being possible, it's actually necessary.