6 Things to Know About Student Loans Before You Start School

The summer before your freshman year in college means choosing classes, checking out your future roommate’s Instagram and figuring out how you’re going to pay the bills.

Chances are you will need a loan: 2 out of 3 students have debt when they leave school, according to 2017 graduate data from the Institute for College Access and Success. But consider a loan after you’ve accepted grants, scholarships and work-study. You can get these by submitting the Free Application for Federal Student Aid, or FAFSA.

Here are six things you need to know about getting your first student loan.

1. Opt for federal loans before private ones

There are two main loan types: federal and private. Get federal loans first by completing the FAFSA. They’re preferable because you don’t need credit history to qualify, and federal loans have income-driven repayment plans and forgiveness that private loans don’t.

You may be offered two types of federal loans: unsubsidized and subsidized. Subsidized loans — for students with financial need — don’t build interest while you’re in school. Unsubsidized loans do.

Take a private loan only after maxing out federal aid.

2. Borrow only what you need — and can reasonably repay

Undergraduate students can borrow up to $12,500 annually and $57,500 total in federal student loans. Private loan borrowers are limited to the cost of attendance — tuition, fees, room, board, books, transportation and personal expenses — minus financial aid that you don’t have to pay back.

Aim to borrow an amount that will keep your payments at around 10% of your projected after-tax monthly income. If you expect to earn an annual salary of $50,000, your student loan payments shouldn’t be over $279 a month, which means you can borrow about $26,000 at current rates.

To find future earnings, look up average salaries in the U.S. Department of Labor’s Occupation Outlook Handbook. Then, use a student loan affordability calculator to estimate payments.

Your school should provide instruction on accepting and rejecting financial aid in your award letter. If you’re not sure how to do it, contact your financial aid office.

“We’re not scary people,” says Jill Rayner, director of financial aid at the University of North Georgia in Dahlonega, Georgia. “We really do want students and families to come in and talk with us so we can help strategize with them.”

3. You’ll pay fees and interest on the loan

You’re going to owe more than the amount you borrowed due to loan fees and interest.

Federal loans all require that you pay a loan fee, or a percentage of the total loan amount. The current loan fee for direct student loans for undergraduates is 1.062%.

You’ll also pay interest that accrues daily on your loan and will be added to the total amount you owe when repayment begins. Federal undergraduate loans currently have a 5.05% fixed rate, but it changes each year. Private lenders will use your or your co-signer’s credit history to determine your rate.

4. After you agree to the loan, your school will handle the rest

Your loan will be paid out to the school after you sign a master promissory note agreeing to repay.

“All the money is going to be sent through and processed through the financial aid office — whether it’s a federal loan or a private loan — and applied to the student’s account,” says Joseph Cooper, director of the Student Financial Services Center at Michigan Technical University in Houghton, Michigan. Then, students are refunded leftover money to use for other expenses.

5. You can use loan money only for certain things

Loan money can be used for education-related expenses only.

“You cannot use it to buy a car,” says Robert Muhammad, director of the office of scholarships and financial aid at Winston-Salem State University in North Carolina. “It’s specifically for educational purposes: books, clothing, anything that is specifically tied to the pursuit of their education.”

You can’t use your loan for entertainment, takeout or vacations, but you should use it for transportation, groceries, study abroad costs, personal supplies or off-campus housing.

6. Find out who your servicer is and when payments begin

If you take federal loans, your debt will be turned over to a student loan servicer contracted by the federal government to manage loan payments. If you have private loans, your lender may be your servicer or it may similarly transfer you to another company.

Find your servicer while you’re still in school and ask any questions before your first bill arrives, says John Falleroni, senior associate director of financial aid at Duquesne University in Pittsburgh. They’re also whom you’ll talk to if you have trouble making payments in the future.

When you leave school, you have a six-month grace period before the first bill arrives.


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The article 6 Things to Know About Student Loans Before You Start School originally appeared on NerdWallet.

3 Things to Do Before You Buy Crypto

Investing in cryptocurrency can be as easy as a few taps on your phone, and with crypto all over the news and coming up in conversations with friends, it’s tempting to dive right in. However, depending on your financial situation and appetite for investing risk, crypto might not be an appropriate investment for you right now — or ever.

“I am the biggest crypto hippie you’ll talk to in a very long time,” says Tyrone Ross, CEO of Onramp Invest, a cryptoasset platform for registered investment advisors. And yet, he cautions against it. “I don’t think the general public should be investing in crypto.”

Picture your finances as an ice cream sundae, with crypto as the cherry on top. It makes up a small proportion of the overall sundae, and not everyone wants one. And before you fish that cherry out of the jar, you need to assemble the rest of your dessert. In non-ice-cream terms, that means creating a strong financial foundation and learning everything you can about crypto before you put any real money in.

1. Put financial safeguards in place

First and foremost, you need to prepare for those times when things don’t go as planned.

Over the past year, workers who lost income because of the pandemic had to tap into savings, take on debt or enter into hardship programs to afford their bills. This time has been a stark reminder of the importance of having an emergency fund.

“When you’re young, you can feel like Superman or Superwoman, but when the bubble happens, you could easily be out of a job for nine to 12 months,” says Theresa Morrison, a financial planner in Tucson, Arizona. “Don’t underestimate systemic shocks to the market.”

Morrison recommends saving up six months of living expenses if you’re single, or around three months if you share expenses with a working spouse or partner. But stashing away even a few hundred dollars can be helpful when you’re faced with an unexpected expense. And if you have any high-interest debt, like credit card debt, paying this down can further strengthen your financial position.

Review your insurance coverage, too, because these policies can provide much-needed money during difficult times. Life insurance can be especially important if you have dependents.

2. Save and invest for future plans

Once you have money set aside for emergencies, begin thinking about your short-, medium- and long-term financial goals. Retirement is, of course, a big thing to save for, so contribute to retirement accounts (especially if you have access to a plan with an employer match). But set specific savings goals for other major life steps.

“Most people want to travel every year, buy a house in 10 years, get married in 10 years. These things cost money,” Morrison says. “Put down how much it’ll cost in today’s terms and figure out how much to save out of your paycheck every month. From my experience, that alone can be $1,000 a month.”

3. Get educated about cryptocurrency

You’ve got the money and you’re ready to jump on the crypto bandwagon, only you have no idea how someone even buys crypto. Or how it will fit into your overall financial plan. Or if it’s too risky for you.

Time out. Don’t do anything with your money that you don’t understand. Dedicate some time to learning everything you can about crypto. Understanding the mechanics is important, but so is learning what kind of investor you are, because that also affects the kinds of investments that would be a good fit for you.

“There’s a process you have to go through to determine if this new asset class is right for you. What’s your plan? How old are you? What are your goals? How tech-savvy are you? Do you understand what it means to hold these assets and have them not be insured? If something happens to you, who in your family knows about this stuff to retrieve it?” Ross says. “People don’t do the right due diligence before dumping money into something. I know that’s not the sexy answer, but it’s the truth.”

If you still want to dabble in crypto, start small

Once you have a grasp on how it all works, you can begin to think about allocating some of your excess cash (after you pay your bills and meet your monthly savings goals) toward crypto. But keep your investment totals small and manageable. Ross recommends investing up to $500 or so. This way, even if you lose it all, it’s an amount you specifically budgeted.

“If you invest in crypto, think of it as dead money. Money you’ll never get back,” says Danny Lee, a financial planner in Denver. “At the end of the day, it’s going to be a speculative investment.”

This article provides information for educational purposes. NerdWallet does not offer advisory or brokerage services, nor does it recommend specific investments, including stocks, securities or cryptocurrencies.

This article was written by NerdWallet and was originally published by The Associated Press.


Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

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How to Handle Mixed-Income Friendships

Finally, as the country reopens, you’re likely seeing more of your friends. Out with the video chatting and in with the high-fiving, hugging and, well, spending.

For every dinner, there’s a check to pay; for every wedding, a gift to buy; and for every concert, a ticket to score.

You may notice that you and your reunited friends handle these kinds of expenses differently. Maybe one of you sees an $80 night out as chump change, while the other feels like a chump for desperately needing that cash for rent.

Here’s how to reenter the world of socializing and spending while keeping friendships and finances intact.

If you’re the friend with less money

Reflect on your finances and priorities, as well as how they may have changed during the pandemic.

“This is an opportunity for everyone to be more mindful about where they want to spend their time, money and resources,” says Kathleen Burns Kingsbury, a Waitsfield, Vermont-based wealth psychology expert and host of the “Breaking Money Silence” podcast.

Consider what’s important to you, she says, as well as the experiences you want to invest in and those you’d rather skip to save money. “Then you can decline invitations a little easier because you feel more solid in your decision,” she says.

Say you realize that during quarantine you didn’t mind PB&J for most meals, but you craved live music. Skip the fancy dinner plans and, if your finances allow, buy the concert ticket.

Or make your own plans if you’re simply longing to catch up with friends. Host a potluck, movie night, bike ride or another more affordable hangout.

With this kind of intention, you’re empowering yourself to make strategic financial decisions. Doesn’t that sound better than bailing because money is tight?

As Kingsbury puts it: “Instead of saying, ‘I can’t, I can’t, I can’t,’ it’s more about saying, ‘This is what I’m going to do.’”

As you reflect on financial priorities, consider creating a budget to match them, says New York-based financial therapist Aja Evans.

A budget is a plan for your incoming and outgoing money — though you can call it something else if the B-word wigs you out. (Evans calls her family budget their “killing-it plan.”)

The key word is “plan.” No need to resort to a shrug or stress-fest when you’re invited to a destination wedding or pricey brunch. With a budget, you already have an idea of how much you can (or can’t) spend on those activities.

If you can’t swing the event, trust that your friends will understand. “I would imagine that, after COVID, people really understand financial stress no matter their level of income or assets,” Kingsbury says.

If you’re the friend with more money

If you can afford the dinners and concerts, then live it up, Evans says. But try to understand that your friends can’t always join you.

Be “empathetic and compassionate and — here’s the hard part — not judgmental,” Kingsbury says.

You may not know your friend’s circumstances. Many people don’t share when they’re financially stressed, Kingsbury says, “because there’s that judgment and shame.” So give your friend the benefit of the doubt when she declines an invite.

And give your friend something else: time. As soon as you plan an outing or learn about a pricey event, tell them so they can try to plan for it, Evans says.

Even with that time, “be prepared that some people might not be able to make it work,” Evans says. Allow friends to opt out or even participate in an alternative plan.

So if you invite friends to a destination wedding, for example, explain that you know it’s an expensive request and understand if they can’t join. Maybe you and your friends who can’t make the trip go out to dinner locally to celebrate instead.

How to talk about money with friends

These spending situations become easier when you and your friends can talk openly about money. If your buddy already knows you’re saving for a down payment or supporting your parents, for example, she’s more likely to understand when you pass on a winery trip.

And if you discuss finances with friends, you may be able to motivate and help each other. Maybe your friend knows of a first-time homebuyer program that could help you with that down payment.

But, of course, money can be a loaded subject. To keep the conversation casual, avoid having it while you’re already out spending money, Evans says. (Or while you’re drinking.)

As for what to say, start with “I” statements, she says, as in “I’ve been looking at my finances and noticed …” With this phrasing, your friend is less likely to feel defensive or pressured to share.

Or start with a more general, less personal chat. Share an article, Kingsbury says, or bring up the financial aspect of a news event or even celebrity gossip.

“Once people start to talk about money in general, then the conversation over time evolves,” she says. And friends “become more vulnerable and willing to share.”

This article was written by NerdWallet and was originally published by The Associated Press.


Laura McMullen writes for NerdWallet. Email: lmcmullen@nerdwallet.com. Twitter: @lauraemcmullen.

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Afford the Summer of Your Dreams by Building a Budget

As concerts, vacations and social gatherings resume, it can be easy to overspend on summer fun, especially coming off of a year of quarantine.

Creating a budget for summertime and beyond can help you keep track of your money, says certified financial planner Jason Dall’Acqua, president of Crest Wealth Advisors, based in Annapolis, Maryland. Dall’Acqua advises doing three things to prepare for building a budget.

How to prepare for your summer budget

  1. Assess your cash flow. Take a look at your cash flow, which is “the crux of everything that happens financially within your household,” says Dan Slagle, founding partner and CFP of Fyooz Financial Planning, a firm based in Rochester, Minnesota. Cash inflow is the money deposited into your account after taxes, while cash outflow is the money you spend on expenses.
  2. Review your habits. Habits have changed out of necessity over the past year. When quarantine became the norm, you may have bought more subscription services, takeout and grocery delivery. Now that the world is slowly opening back up, anticipating your expenses can help you budget. Think about the expenses and habits you didn’t have during quarantine, like driving, dining out, traveling and paying student loans.
  3. Set goals. Look to the future and consider making a list of all your short and long-term financial goals. Identifying your priorities before creating a budget could make the process easier.

4 steps to create a budget this summer

Once you’ve prepped for your budget, it’s time to create it. Dall’Acqua suggests four steps to create a budget:

  1. Understand your total household income. Take note of your total income, which includes wages, salaries, investments, savings, welfare or other government benefits and other ways you earn money.
  2. Include savings. No matter the season, putting aside money for the future is always a good idea, so work savings into your budget. Save money by contributing to a retirement plan like a 401(k) or IRA. Or stash your funds in a high-yield savings account.
  3. Determine all fixed expenses. Fixed expenses are recurring, so they are less likely to change monthly. These costs include housing expenses, utility bills and car payments.
  4. Allot for discretionary spending. This category includes expenses that vary monthly, like shopping and eating out. Budget for discretionary spending by allotting certain amounts of money for individual items. Or stay within the spending limits of a fixed sum of money. For example, you can budget $50 on eating out and $100 on shopping each month. Or budget a total of $500 to spend at your leisure each month.

Choose a budgeting method that works best for you. The 50/30/20 method is great because you break down your budget into percentages, and it’s easy to follow and track, says Bola Sokunbi, CEO of Clever Girl Finance. You contribute 50% of your income to needs, 30% to wants and 20% to your savings once you follow the steps above. To build your budget, you can use a simple Microsoft Excel spreadsheet, or a budgeting app and online tool with more features.

Revisit these steps and tweak your budget as needed — Dall’Acqua recommends at least one to two times a year. Even if your budget isn’t where you want it to be, don’t be discouraged. Sokunbi says it’s most important to do your best to save a little bit extra than planned and build your emergency fund.


Aysia Morton writes for NerdWallet. Email: aysiam@nerdwallet.com.

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Should You Become Your Own Boss?

Maybe you’re cringing at the thought of going back to an office. The seed of a business idea floats around in your head between work videoconference calls, after the kids are asleep or while you tend your pandemic garden. Or perhaps you were laid off during the pandemic and forced to work for yourself, and now you’re wondering if you should continue down this path.

“In 2020, there was an explosion in new business applications, reaching nearly 4.5 million by year’s end,” according to a February report by the Economic Innovation Group, a Washington, D.C., think tank. That’s an increase of 24.3% from 2019 and was the highest on record — 51% higher than the average from 2010 to 2019.

“COVID-19 was a social, cultural and emotional shock the likes of which we have not experienced for generations. Becoming an entrepreneur is a deeply personal decision, and the pandemic may have delivered the push for many to embrace it,” the report said.

Deciding if self-employment is right for you depends on your personality, your financial situation and your ability to adapt. Here are tips from people who became their own bosses.

See if you’re right for the job

Many of us now appreciate the flexibility of working from home. As a freelancer or independent contractor, you would have the power to set your own schedule.

“Being in charge is very, very attractive to many people,” says Keith Hall, president and CEO of the National Association for the Self-Employed, or NASE, a resource and advocacy group. “The other side of that coin is that when you are in charge of your own destiny, you are also responsible for it.”

Evaluate your abilities as a prospective employer.

“Freelancers need to be self-motivated, work well independently, be organized, learn how to market their services well and be comfortable with a certain level of uncertainty,” CEO Sara Sutton said by email. She runs two companies focused on remote and flexible job opportunities:  FlexJobs, a job search site, and Remote.co, which provides resources for companies considering remote work.

Hall suggests asking yourself if you have the motivation to be in charge of your own destiny. “If you wake up Monday morning and decide to stay in bed late, that’s a financial loss. Nobody is going to be standing over you making you get out of your bed.”

Make a plan that fits your finances

Before deciding whether to freelance, become a consultant or turn your side hustle into a business, take a close look at your finances.

Many cobbled together a budget during the pandemic. Revisit that plan to make sure you understand your hard costs, such as food, rent and day care. (The 50/30/20 approach is a quick way to divide your dollars into three buckets: needs, wants and savings.)

Isolate what you can put toward a business. Small costs like purchasing a domain name, buying the premium version of a software or membership fees for a networking group can add up.

Use your budget to set short- and long-term business goals, Hall says. “Know exactly what you need to earn to meet your family goals and translate that into a time schedule.”

Evaluate your timing

You may need to keep your day job for a while, but you can still build your business muscle.

“Being an entrepreneur was never a goal for me,” says Afenya Montgomery, founder and CEO of iCAN Collective, a creative workspace and event venue for women entrepreneurs of color in Chicago. Montgomery, a registered nurse and health care administrator, started health care consulting on the side. Her hunt for resources and support inspired the idea of building a community for women entrepreneurs of color.

Montgomery and her husband were raising three children and had no business experience, so leaving her day job wasn’t an option. She spent four years learning the ropes of entrepreneurship before she felt confident enough to quit.

She hosted networking events, opened a business bank account and finally registered her business as a limited liability company. Taking small steps can make the process less overwhelming, she says.

Seek support

Between strategies, goals and budgets, the thought of working for yourself might seem daunting, but entrepreneurs say you don’t have to do it alone.

Laura Licursi, founder of Elite Virtual Assistants, an agency that connects employers with remote assistants, says the pandemic was surprisingly hard on her online-only business as clients cut back. Licursi, who works from the Cleveland area, navigated through the uncertainty with a mentor from SCORE, a network of volunteer business mentors that partners with the Small Business Administration.

“My mentor helped me work through the inner workings of the business when things were slow, which really helped when business picked up again,” she says.

Entrepreneurs have more resources available than they realize, Hall says:

  • The SBA provides local resources to support aspiring entrepreneurs.
  • The NASE offers a business development grant program for members.
  • SCORE has mentorship resources, webinars and other online resources.
  • The IRS website has information on the tax implications of self-employment.

This column was provided to The Associated Press by the personal finance website NerdWallet.


Amrita Jayakumar writes for NerdWallet. Email: ajayakumar@nerdwallet.com. Twitter: @ajbombay.

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How to Travel Safely and Cheaply This Summer

As vaccination rates inch upward, Americans are beginning to travel again. More than 10 times as many passengers passed through Transportation Security Administration screenings in the first week of April compared with the same period last year, a sign that some degree of normalcy is returning.

And travel this summer could get far busier.

“Right now, we’re still awash in cheap summer flights,” says Scott Keyes, founder of travel deals newsletter Scott’s Cheap Flights. “But with vaccinations accelerating quickly and interest in travel spiking, cheap summer flights may not be available much longer.”

Yet the question of whether it’s safe to travel remains. Infection rates remain high, despite accelerating vaccination efforts. Even vaccinated individuals are realizing that they may not be in the clear to return to life — and travel — as normal.

How to travel safely

Getting fully vaccinated is the first step toward travel safety, but it’s not the last. The Centers for Disease Control and Prevention have issued updated guidelines for vaccinated travelers, giving the go-ahead to domestic travel. Yet it still recommends following the familiar protective protocols: wearing a mask, maintaining social distance and avoiding crowds.

“Even with a vaccine, the fundamentals of COVID-19 still apply,” Dr. Jessica Shepherd, chief medical officer of Verywell, an online health website, said in an email. “With travel, only the scenery changes, not the reality. As we move towards more of a normal life, it is important to approach it carefully rather than abruptly in lifestyle changes.”

If the CDC recommends maintaining social distance, is it safe to fly at all?

“This risk of transmission in airplanes is relatively low as the airflow in current jet airliners is much faster than normal indoor buildings and half of it is fresh air from outside,” she said.

How to travel cheaply

Although many factors will affect the cost of your potential vacation, one looms especially large: timing.

“I’d start booking as soon as possible,” says Matthew Kepnes, founder of Nomadic Matt, a budget travel website. “There’s a lot of deals out there right now, but they won’t last long … so my advice is to book soon.”

This strategy also takes advantage of a seismic shift in airline policies.

“Many travelers may have missed the fact that all full-service U.S. airlines have permanently gotten rid of change fees if you book a ticket in main economy, premium economy or business/first class,” Keyes says.

Aside from basic economy, most fares are now far more flexible than before the pandemic. This creates an incentive to book sooner, then rebook if plans fall through.

Experts also recommend looking for deals, rather than trying to travel to popular (and expensive) destinations. Average airfares might rise, but deals will remain if you hunt for them.

Then, there are always travel rewards, which have been piling up in many accounts throughout the pandemic and can offset the costs of travel — but only if you use them.

Where to travel

Before you book a flight overseas, know that most countries are still enforcing restrictions on U.S. travelers and that the CDC and State Department have issued blanket “do not travel” advisories for most countries worldwide, even for vaccinated travelers. That doesn’t mean international travel is off the table, but it does limit the options.

“There are countries like Mexico and Costa Rica where Americans can visit today without any COVID prerequisites like testing or quarantine,” Keyes says. “(And) there are a growing number of countries like Iceland and Belize that allow fully vaccinated Americans to bypass any testing or quarantine requirements that are mandatory for unvaccinated visitors.”

And many countries remain fully off-limits to U.S. travelers for the foreseeable future. Even countries that are allowing tourists, visitors are still subject to local restrictions and curfews. Do your research beforehand to make sure you can enjoy your destination once you get there.

The U.S. will still require a negative COVID-19 test three days or less before your return flight. So even if you are vaccinated, you will need to spend time at the end of your trip obtaining a negative test.

Some of these restrictions are bound to change this summer, but it’s impossible to know which ones, or when. So many travelers, including the experts, are again opting to travel domestically this year.

“I’m about to embark on a seven-week road trip around the U.S.” Kepnes says. “I’ll be focusing on national parks and outdoor adventures.”

Sound familiar?

This article was written by NerdWallet and was originally published by The Associated Press. 


Sam Kemmis writes for NerdWallet. Email: skemmis@nerdwallet.com. Twitter: @samsambutdif.

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6 Steps for Financial Spring Cleaning, Pandemic-Style

Given the challenges of pandemic life, many financial tasks may have stayed on the back burner this year as we all tried to just make it through each day. At the same time, the pandemic had a big impact on our financial lives, and some money-related to-do’s are likely in order.

Now that it’s spring, it’s a good time to conduct a thorough review of your finances and address any neglected areas. Here’s how to spring clean your finances after a year of pandemic living.

1. Update your budget

Your spending patterns might have totally changed over the last year: According to the Federal Reserve Bank of St. Louis, travel, hotel, restaurant and bar spending fell during the pandemic, while grocery and beverage store spending went up.

So it may be time to create a new budget that reflects current expenses, says Curtis Bailey, certified financial planner and founder of Quiet Wealth Management in Cincinnati. “Covid changed spending patterns last year, and potentially going forward,” he says. He suggests anticipating what habits you plan to continue beyond the pandemic and avoiding any drastic changes, such as buying a second home, until you’ve done a thorough analysis of your needs going forward.

Shea Newton, CFP and president of Financial Journey in Leesburg, Virginia, recommends redirecting some of that previous spending into an emergency savings account. Some people, she says, may want to replenish their emergency fund after dipping into it over the last year, or boost it to a higher level, given the income uncertainty many people continue to experience.

2. Set new financial goals

Looking forward to beyond the pandemic, you might want to set new financial goals, such as finally taking a big vacation or finding a job that allows you to continue working from home. “You may be reeling, trying to figure out your direction again. Ask yourself what is truly important” and whether your current spending reflects that, suggests Andrew Mitchell, CFP and financial advisor at Fiduciary Financial Advisors in Grand Rapids, Michigan. If you want to go on a big trip but much of your spending currently goes to daily expenses, then you may need to adjust your budget.

Mitchell also suggests asking yourself if you’re prepared for the next catastrophe. Looking back, do you wish you had had a larger savings fund going into 2020 or more diversified investments? Reflecting on those questions can help you set new goals that will help you get through the next challenge, he says, whenever it may arrive.

3. Review your insurance coverage

The pandemic has had a big impact on our homes: Not only are we spending more time inside them, often with more expensive technology and other items to help us work or attend school from home, but housing prices have also increased. According to the Federal Housing Finance Agency, home prices rose 10.8% between the fourth quarters of 2019 and 2020. You might need more insurance coverage than you currently have, says Noah Damsky, principal of Marina Wealth Advisors in Los Angeles.

The cost of building materials has also gone up, which means it would cost more to replace a damaged home, he adds. His firm recently helped one of its clients increase their dwelling coverage by 40% to better reflect how much it would cost to rebuild the home today.

Damsky also recommends increasing coverage for water damage. “Since we’re spending more time at home, we’re likely using water more frequently, and the potential for plumbing issues increases.” If you rent, then renter’s insurance is crucial. Apartments carry a higher risk for flood damage with so many people at home straining the shared infrastructure, he says.

4. Streamline subscriptions

Because of all the time spent at home, many families increased their spending on subscription services such as Disney+, Netflix and HBO. As we all start to leave the house more, it might be time to scale back, suggests Jason Dall’Acqua, CFP and president of Crest Wealth Advisors in Annapolis, Maryland. “Cancel the subscription services that you will no longer be using as much and realign your budget with more normal circumstances,” he says.

5. Update your credit card

If your spending patterns have changed, you might also want to consider a new credit card that better maximizes your current lifestyle. Bailey suggests first logging into your credit card accounts and pulling up a summary of last year’s spending, as well as the rewards that you earned.

Did you maximize your reward earning potential and redeem those rewards in valuable ways? If you spend a lot on takeout or restaurants but your current credit cards don’t reward you for that spending, then it might be time to apply for a new card that does, he says.

6. Zero out mobile app balances

Given the rising popularity of payment apps like Venmo, PayPal and Cash App, it’s a good idea to check your balances: NerdWallet found that about two-thirds of mobile payment app users say they have maintained a balance in their accounts, which means they aren’t earning interest on that money. Instead, consider transferring your cash into a high-yield savings account.

“Interest rates are low right now, but if you get into the habit now of moving money into your savings account, when interest rates rise, you will see a bigger impact,” says Newton.


Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

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How to Fill In Your Financial Blind Spots

Knowing enough about money to cover your bills is a start, but it’s not enough financial literacy to provide long-term security. Most of us eventually wonder what else we should be doing — and whether what we don’t know could hurt us.

“When you have a blind spot, you don’t realize until something blindsides you,” says Mark DiGiovanni, a certified financial planner in Grayson, Georgia.

Identifying the gaps

Self-assessments, like this quiz adapted from the Financial Health Network, as well as personal finance books and websites can help shine a light on what you don’t know.

Accredited financial counselor Bret Anderson of Morrison, Colorado, has spent much of his career helping incarcerated veterans get back on their feet and has also advised high-wealth clients. He says five things frequently predict who will manage money successfully.

Two habits — saving and investing — are crucial, he says. Good money managers also:

  • Know how credit works.
  • Have a plan to build wealth and pay off debt.
  • Know what passive income is and how to create it.

If anything on that list is unfamiliar to you, that suggests a starting point for research. “There are plenty of resources just a Google search away,” says Heather Winston, assistant director of advice and financial planning at Principal Financial Group.

Nail the basics, then keep learning

Before you add complexities, be sure you are:

  • Saving. It’s an essential habit.
  • Budgeting. If you don’t have a formal budget, check online for help creating one.
  • Planning for emergencies. You can’t prevent unexpected expenses. But an emergency fund, excellent credit, insurance — or all of those — can keep them from devastating your finances.

Next, protect your money and access to credit. Here’s how:

Check your credit scores and reports, Anderson suggests. Lenders and potential landlords or employers may see those, so it’s smart to know what’s there. In addition, a big swing in your score or an account on your credit reports you don’t recognize could suggest identity theft.

You can check your credit reports for free by using AnnualCreditReport.com. Many personal finance sites and credit card issuers provide access to free credit scores.

Keep your identifying information safe and practice good cyber hygiene. That means avoiding public Wi-Fi, being careful about what you post on social media, not opening email attachments or links you weren’t expecting, and using strong passwords. Consider freezing your credit — and that of your child — to reduce the likelihood that you’ll be victims of identity theft. Setting alerts on your credit card accounts can also let you know when they’re used.

Learn to recognize scams. Scammers try to create a sense of urgency so that you pay first and think later. They know how to make phone, email or text communications seem real. Pause before acting, independently confirm the contact information and initiate communication yourself. And remember that no one legit asks for payment by gift card or prepaid debit card.

Set goals for yourself and remember that those are individual. “One of the most critical lessons to learn is to stay focused on your needs, not on what someone who doesn’t know you, your goals or your life is saying,” Winston says. Consider working with a fee-only, fiduciary financial planner or a financial coach for help with identifying your own goals and path.

Avoid overconfidence. If you’ve had some success investing in a bull market, for example, you might not be an investing genius. Feedback from a professional may help you decide whether you were smart or just lucky, DiGiovanni says.

Help your children become financially literate. And put guidance in language they understand, Anderson says. He recalls his mother putting money aside in a “rainy-day fund,” which made no sense to him because where they lived, it seldom rained. Help children see how money is relevant, he suggests. Let them see how you make financial decisions, then let them make a few of their own.

Learn as needed

You don’t need to become a walking financial encyclopedia. There are things you may never need to know or that you can learn when they become relevant. Examples include:

  • Financial consequences of big life changes, such as marriage, divorce, parenthood or retirement.
  • Refinancing a mortgage.
  • Rent vs. buy decisions.
  • Saving for college.
  • Mandatory retirement withdrawals.
  • Income tax implications of side jobs.

Don’t wait

While no one wants to make a mistake, the costliest one may be waiting until you have “extra money” or feel more confident about financial decisions. The sooner you start saving and investing, the more compound interest can grow your wealth.

“People don’t understand the time value of money,” DiGiovanni says. “Every day you postpone is another day you will have to work.”


Bev O’Shea writes for NerdWallet. Email: boshea@nerdwallet.com. Twitter: @BeverlyOShea.

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5 Pandemic-Driven Financial Habits Worth Keeping

As the pandemic shut down the world around her, Ashli Smith, an Atlanta resident and mom to a newborn, says she set up autopay for her recurring bills to help her stay organized and avoid late payments. “With everything going on, plus being a mom, I don’t want to forget to pay something or someone,” she says.

While the pandemic caused incredible financial stress and uncertainty, it also led many consumers like Smith to form new financial habits worth keeping, including saving more and spending less. A NerdWallet survey found that most people who formed new financial habits plan to continue them into 2021.

Here are five habits to consider sticking with even as life starts to return to normal:

1. Spend less, save more

For many Americans, spending less amid the COVID-19 pandemic came naturally because of income loss or fewer spending options after restaurants and travel largely shut down. NerdWallet’s survey found that among those who said they picked up new financial habits during the pandemic that they plan to carry into 2021, 58% said they were cutting back spending on “wants” and 36% said they were cutting back spending on “needs.”

“If your job was eliminated or your pay was reduced, then you’ve probably decreased spending and gotten used to a lower monthly budget,” says Eric Simonson, certified financial planner and owner of Minneapolis firm Abundo Wealth. “As soon as that income returns, it would be an amazing opportunity to keep expenses the same but save all of that new income.”

Natalie Slagle, founding partner at Fyooz Financial Planning and a CFP based in Rochester, Minnesota says, “For those who were furloughed or laid off, the No. 1 priority is replenishing savings.” For those who got used to spending less, she says, “we encourage them to sustain that habit so their cash flow can go toward building up their emergency fund at a higher rate than what was possible before the pandemic.” That way, it’s easier to handle the next crisis, whether it’s income loss or an unexpected expense, without taking on more debt.

2. Stick with a budget

In the NerdWallet survey, 39% of those who adopted new habits that they plan to carry into 2021 said that one of those habits was sticking to a budget.

“So many people have looked at their budgeting and spending during [the pandemic], often for the first time,” Simonson says. “It’s important to stick with this post-pandemic, since keeping a budget is part of a healthy financial plan.”

Many people turned to budgeting to help regain a sense of control that the pandemic took from them, he adds. “The financial habits you’ve been forced to learn and adopt have the power to create huge, positive, lasting change if you stick with them,” Simonson adds. Continuing to budget makes it easier to generate long-term savings and avoid debt, for example.

3. Minimize travel expenses

Among survey respondents, 40% said one of the new habits they plan to continue in 2021 was cutting back on travel spending.

“One reason we saw our clients enjoy lower expenses [during the pandemic] is because they didn’t go on their planned vacations,” Slagle says. “Not only did that cut expenses, but they also have flight vouchers and unused travel miles to spend.”

As travel begins to start again, Slagle says she’s helping clients plan on using some of those savings and credits on their next trip to avoid overspending.

4. Earn extra income

Based on the study, among those who developed new financial habits, just over a quarter said they picked up a side hustle or extra work to make money. Kevin Mahoney — a CFP and founder of Illumint, a financial planning firm for millennials based in Washington, D.C. — says earning a side income can help provide financial stability during uncertain times, which is why he encourages his clients to consider it.

“Supplemental income mimics an emergency savings fund. People who can consistently generate self-income are better prepared to withstand financial volatility,” he says.

5. Use autopay for bills

As for Smith, who tweets about personal finance from the handle @badgirlfinances, she says she plans to continue using autopay for bills, even when the pandemic is long over. In some cases, autopay comes with a small discount, too.

“It helps me stay organized because I know on a certain date, money has to come out to pay the bills,” she says.

This article was written by NerdWallet and was originally published by The Associated Press. 


Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

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When Life Blows Up Your Well-Laid Plans

Job loss, business failure, involuntary retirement, divorce, disability or the death of a breadwinner — these are just some of the ways our finances can force us to come up with a Plan B. That’s never as simple as downloading a list and ticking off completed assignments, however.

Checklists can be helpful, for instance when you’ve just been laid off. But the biggest task after financial loss may be dealing with your emotions after the future you had envisioned disappears.

Be realistic about your emotions

People who lose a loved one expect to grieve. People who lose their financial security or a standard of living suffer “ambiguous loss,” where many elements of their lives are the same but a major element is now gone, says financial therapist Edward Coambs of Charlotte, North Carolina.

“You know what’s happened, but it’s not like you get a funeral for it,” says Coambs, a certified financial planner and couples therapist. He’s a member of the Financial Therapy Association, a group of advisors who combine financial and psychological counseling.

Acknowledge that your grief is legitimate rather than trying to minimize what you’re going through, Coambs says. Also, don’t expect grief to proceed in predictable stages. Psychological research shows that grief is more dynamic than that, and people may feel shifting emotions that can include sadness, despair, confusion, disorientation, fear, anxiety and even relief.

“A lot of the grief around the financial loss is going to feel kind of unexpected,” Coambs says. “‘Why am I crying now? Why am I angry now? Why am I disappointed or lethargic?’”

This process won’t be quick, Coambs says. Our brains get used to our habits and routines. When those get dramatically disrupted, our brains need to catch up.

“It takes time for the neural pathways to adjust and change, right? My brain is literally needing time to reorganize itself,” Coambs says.

You can help this process by discussing your emotions with someone you trust, says financial therapist Preston D. Cherry, a certified financial planner in Lubbock, Texas. Cherry says writing can help. He writes poetry, but writing in a journal is also effective. Studies have shown that expressive writing — writing nonstop for 15 minutes or so each day without inhibitions about the traumatic event or experience — can help people deal with emotional fallout. Writing can help us organize our thoughts and give meaning to what happened, which can help us break free of ruminating or brooding.

Talk to your kids

Many of Coambs’ clients have problems with money that stem from childhood traumas, often because of a parent’s layoff or the loss of a family business.

“What they often end up seeing is the parent lose their sense of self, fall into depression and despair, and never make it out,” Coambs says.

Processing your emotions can help you avoid that fate, and if you’re raising kids you’ll also want to talk to them in age-appropriate ways about what’s going on, he says. Children need to know this isn’t a problem they created and it’s not their responsibility to fix it.

“Kids will assume inappropriate levels of responsibility for negative outcomes financially,” Coambs says. “Parents can say, ‘Mommy and Daddy are taking responsibility for this. We’re going to try to find the answers. You can come to us with your fears and concerns.’”

Know when to get help

If you’re struggling, keep in mind that this is just one phase of your life and that it, like the current pandemic, will pass, Cherry says. He also recommends regular “self audits” — taking time alone to reflect on what’s happened, work through your feelings and start to consider possible futures.

But when you’re feeling stuck or isolated, you may need to seek professional help. If you’re employed, your company may provide mental health resources. If money is tight, 211.org may be able to point you to free or low-cost treatment.

Depression or anxiety that persists for weeks or months isn’t normal and may need medical treatment. If you don’t have someone to talk to who is empathetic, understanding and nonjudgmental, a therapist could help guide you through your trauma so you can move on with your life.

“That’s probably one of the bigger things that I see, is when people don’t have other people to process the grief with or they feel like they’re becoming a burden,” Coambs says. “That’s when professional help can be a big win.”

This article was written by NerdWallet and was originally published by The Associated Press.


Liz Weston is a certified financial planner and columnist at NerdWallet, a personal finance website, and author of “Your Credit Score.” Email: lweston@nerdwallet.com. Twitter: @lizweston.

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