Advice for Renters Priced Out of Homebuying

Today’s housing market can feel like a dream killer.

Rising mortgage rates, high home prices and a shortage of properties for sale deliver a one-two-three punch.

If you’ve been knocked out of one too many deals and need a timeout, here’s how to regroup and keep the homeownership dream alive.

Give yourself a break

Given the rise in home prices and interest rates, the monthly mortgage payment for a median-priced single-family home with a 10% down payment has jumped by about $800 since January, according to a June 2022 National Association of Realtors press release.

That’s huge.

It’s OK to hit pause if you’re frazzled to the point that you can’t think clearly or are simply priced out.

“If it doesn’t feel right to you … step away and give yourself some breathing room,” says Catalina Franco-Cicero, a certified financial planner with Tobias Financial Advisors in Plantation, Florida. “It’s OK to do that.”

But stepping back doesn’t mean giving up.

“One thing we tell people with any goal that you have is that there’s a big difference between ‘no’ and ‘not yet,’” says Nathaniel Moore, a certified financial planner and president of Agape Planning Partners in Fresno, California.

Strengthen your finances

View the break as an opportunity to get your finances in even better shape.

Budget like a homeowner

Use a mortgage calculator to estimate a monthly mortgage payment, including estimated property taxes and home insurance. Then add utilities plus 20% of the monthly mortgage for unexpected maintenance and repairs, Moore suggests. Subtract your rent payment from that amount and set aside the rest in a high-yield savings account.

“That way, if and when you can get in the home, you don’t have sticker shock or you’re not house-rich and cash-poor because you didn’t account for the other expenses,” Moore says.

He likens the transition to a relay race.

“You want to have a smooth baton handoff, from the ‘renter you’ to the ‘homeowner you.’ If you’re not ready to walk in that house and afford the ancillary costs of living there, that’s when the baton fumbles and drops,” he says. “You want to get to the place where the rental person is running at the same speed as the homeownership person so when the baton is handed off it’s a smooth transition.”

When you’re ready to buy, you can add that extra money you’ve socked away to your down payment, which will help you make stronger offers and may qualify you for better mortgage rates.

“Nobody can truly predict interest rates nor inflation, nor the appreciation rate of homes in a relatively short period of time,” Eric Lefkowitz, president and chief operating officer of Motto Mortgage Mint in San Diego, said via email. “But we can be certain that buyers should be saving for strong down payment options. This will ensure they can get the best available interest rate when the time comes.”

Pay down debt

Paying down credit cards and other debt will improve two measurements: your credit score and your debt-to-income ratio, or DTI. Both are key factors that lenders consider when deciding whether you qualify and at what rate.

A good DTI — the percentage of gross monthly income that goes toward debt — is generally under 36%. The lower the better.

Your credit score is based in part on credit utilization, the percentage of available credit used. Shrinking your debt will lower credit utilization and help your score. Meanwhile, keep making on-time payments to preserve good credit.

“It’s going to give you a better mortgage rate and more options,” says Deb Gillard, a real estate agent with RE/MAX Venture in Owatonna, Minnesota.

Avoid optional big expenses

Resist the temptation to vent your frustration in a spending splurge, whether it’s running up a credit card balance or buying a new car when the old one suffices.

“That’s the last thing you want to do when you’re taking this pause,” Gillard says.

Another enticement may be to move to a nicer apartment. But stay put if you can, advises real estate broker Peggy Pratt, who leads the Pratt Properties Team of Century 21 North East in the Boston area. Paying the security deposit and other moving expenses could cut into savings for a down payment.

Reevaluate your wants and needs

This is a good time to look at the big picture.

“People need to do some soul searching to say, ‘What am I looking for in a home?’” Moore says.

Given home prices and mortgage rates, you may need to adjust your filters. You may need to shop for homes in a different neighborhood or buy something smaller than originally imagined. If the aim is to buy a starter home, build equity and upgrade in a few years, then that flexibility may pay off.

“Homeownership is a step-by-step opportunity,” Lefkowitz said. “You are not committing to stay in a home forever.”

If you could work elsewhere, another option you might consider is relocating to a less-expensive housing market, Franco-Cicero says. That’s a big decision. Taking a pause can give you time to research the quality of life and cost of living in other locations and weigh whether you want to live somewhere else.

Keep in touch with your agent, lender

Besides fine-tuning finances and reevaluating goals, keep in touch with experts you trust who can watch the market and bring you back in when you’re ready, Lefkowitz said.

“This includes a strong Realtor and mortgage professional,” he said. “Together, that partnership can keep the buyers’ best interest top of mind and be ready to pounce on an excellent property when it becomes available.”

Let them know if you can make a bigger down payment, for instance. Keep your agent updated on when you might be ready to jump back into the market and the types of homes and areas you’re willing to consider.

Pratt says she counsels clients to maintain realistic expectations and not give up.

“Hang in there,” she says. “Something will come.”

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What if You Can’t ‘Out-Budget’ Inflation?

Inflation is a nightmare for the many Americans who already stretch their dollars to cover basic needs. What happens when those dollars lose value?

Their choice is probably not about whether to cut streaming services or opt for store-brand groceries. Instead, they may have to pick between buying enough food and paying rent.

The families hit hardest by inflation typically have little in savings and other resources. And that lack of access to wealth can be rooted in a history of inequality, says Phuong Luong, a Massachusetts-based certified financial planner and founder of Just Wealth, a financial education and consulting firm.

For example, say generations of your family have been underpaid or limited in where they can live, due in part to racist policies. Then inflation causes everything to become more expensive.

You may have to scrape together cash to support not just yourself, but also family or community members. Perhaps you have to spend money and time traveling across town to the grocery store or doctor’s office.

“Your proximity to people with resources and people with wealth is going to be different depending on where you live and who you are,” Luong says. “There’s a larger context than just expenses and budgeting.”

Whatever context describes your situation, here’s how to combat inflation if money is already tight.

Prioritize essentials

Aim to pay for expenses that enable you to live safely: housing (mortgage or rent), utilities and food. Also try to cover costs that help you work, such as transportation, cell phone and child care.

Next-level priorities are those that trigger major consequences if you don’t pay: taxes, child support and insurance.

For credit cards, aim to pay your minimum at least, because you may need that credit access.

Tap local resources

If you’re struggling to pay bills, find support. Luong suggests Findhelp.org, which lists local programs designed to cut costs across many categories.

Calling 211 or visiting 211.org can also help you find assistance related to housing, health, food and emergency costs.

Pick up the phone

You may also save money by calling credit card and insurance companies, lenders, banks, cell phone providers and other businesses you pay.

With the pandemic affecting so many consumers, these companies “are a little more empathetic than they have been,” says Emlen Miles-Mattingly, co-founder of Onyx Advisor Network, a Sacramento, California-based support platform for underrepresented financial advisors.

They may pause or lower payments, for example, or forgive overdue bills. Or they could lower your interest rate.

But you have to ask. And often a patient phone call with customer service yields quicker, more effective results than an email or online form.

Connect with your community

To overcome financial struggles, “community is going to be major,” says Dasha Kennedy, Atlanta-based financial activist and founder of The Broke Black Girl Facebook community.

Leaning on — or supporting — your family members, friends and neighbors can take many forms. For example, Kennedy points out how temporarily living with others can lower housing expenses. Or you can pool resources by sharing a vehicle or splitting a large expense.

To connect with supportive locals you’ve yet to meet, look to libraries, religious organizations and recreation centers. Or use virtual platforms like Facebook and Nextdoor.

In these in-person and online spaces, you may find free or inexpensive goods and services. Maybe someone will give away secondhand clothes or walk your dog while you work.

Or seek guidance. Your neighbors may point you toward free, nearby health resources, for example, or describe what’s helped them stretch their money.

Profit from your skills

Of course, making more money helps, too. If you’re already working, Kennedy recommends first trying to increase earnings through your employer. Consider working overtime or negotiating raises and role changes, she says.

Or explore side work — with caution. Plenty of online gigs could waste your time, take your money or misuse your personal information.

“It’s high time for frauds and scams,” Kennedy says. Trust your gut, and read reviews. Also check the Federal Trade Commission and Better Business Bureau websites for tips to avoid scams.

The most effective way to make money? “Monetize skills you already have,” Kennedy says. These could include anything from cleaning and organizing to writing and designing.

Assuming you start without clients, she suggests tapping your community once again.

“You may not have the time to build trust and reputation, so you’re going to have to rely on personal relationships,” she says. Ask friends, neighbors and family members to promote and vouch for you.

Mind your mental health

Money struggles are exhausting. So regularly “connect with yourself,” Miles-Mattingly says. Identify what makes you feel better, whether it’s walking outside, calling a friend, meditating or reading.

If time is tight, make your activity quick, and consider Miles-Mattingly’s point: “People, when stressed, don’t have the best decision-making abilities.” And hard times mean hard decisions. It pays to feel centered before negotiating a lower bill or agreeing to a side job.

To avoid feeling overwhelmed during times of financial stress, Kennedy tries not to overthink the unpredictable future. Instead, she suggests “focusing on getting through the day.”


Laura McMullen writes for NerdWallet.

How to Save More When Inflation Makes Your Money Count Less

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

When it comes to spending power, inflation means that things cost more and that your money becomes less valuable. When a period of high inflation hits — like right now — you may want to consider changing up the way you handle your finances to help protect the value of your cash.

“Inflation is a time for investors and savers to reevaluate their strategies,” says Walter Russell, CEO of financial advisor firm Russell and Company.

Through the Federal Reserve, the government tries to combat inflation on a large scale by raising the federal funds rate, which is the interest rate that commercial banks use to borrow and lend money to each other.

When the cost of borrowing becomes more expensive, higher interest rates trickle down to consumer products such as loans and mortgages, making them more expensive. But higher interest rates may also apply to deposit accounts, meaning that banks start to offer higher interest rates on checking, savings and certificates of deposit.

No one knows what the future will bring, but by making changes to how you spend and where you keep your money, you may be able to weather times of inflation more easily.

Here are some ways to save more during periods of inflation.

Look for high-yield interest rates

It can be frustrating to not be able to get loans for big purchases as easily during periods of high inflation. Still, consumers can take advantage of higher interest rates on bank accounts to fight the effects of inflation on their cash. Bank account interest rates usually don’t totally beat the rate of inflation, but these accounts can help hedge against inflation far better than keeping cash at home or in a low-rate account.

The national average annual percentage yield for savings accounts is 0.06%, according to the Federal Deposit Insurance Corporation, but there are plenty of financial institutions that offer rates that are much higher — some even 1.00% APY or more. To find these rates, you can research high-yield or high-interest accounts and choose the bank that works best for you.

Find ways to keep costs low

If you haven’t looked over your budget in a while, now may be a good time. During the pandemic, you may have subscribed to multiple streaming services that you don’t use anymore, or you might be spending more money dining out or paying for more convenience services now.

Some people are taking even more radical steps to save money. Amanda Claypool, a financial blogger based in upstate New York, has recently made larger lifestyle changes to keep her costs low in the face of inflation. She spent 2021 living out of her car while driving around the country and plans to return to that way of living soon to save on housing costs. She’s also been trying to trim her budget by biking 16 miles round-trip to work and by eating more rice and beans, a cheap but healthy meal.

“I’m concerned about rising food costs and the impact that will have on the entire supply chain,” Claypool said through direct message. “I’m using the time now to prepare for future food insecurity by learning what food my body actually needs compared to what I enjoy eating. This might seem drastic, but it’s helping me save money and eat better in the short term.”

Not everyone can or wants to move into their car, but Claypool’s money-saving tactics can work on a smaller scale. You can bike more often instead of driving everywhere, and you can reevaluate your food budget to add more cheap healthy meals. For a bigger change, you could downsize your housing to save even more money.

Consider investing or buying bonds for long-term savings

It’s a good idea to keep short-term cash — like an emergency fund — accessible in a savings account, but if you have savings that you don’t expect to need for a year or more, you may want to consider investing those funds or buying a treasury bond.

“For someone who has a lot of cash sitting on the sideline, [investing] could help you not lose money,” Russell says. ”More people might be willing to take on more risk because they want a higher rate of return.”

Russell also recommends that consumers look into getting TreasuryDirect Series I savings bonds, which can give an interest rate of over 7% on up to $10,000 for a one-year term. These bonds are basically like a certificate of deposit: You put your money in one for a year, and by the end of the year you have a guaranteed rate of return that hopefully stays higher than the current rate of inflation — so your money won’t lose value.

The government will continue to review inflation data and make appropriate changes to the federal funds rate. However, there are other factors that may slow inflation in the coming year, such as changes to global supply chains that might free up inventory and lead to lower prices for goods. No matter whether inflation goes up or down, though, it’s a good idea to keep an eye on ways to optimize your savings.

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


Chanelle Bessette writes for NerdWallet. Email: cbessette@nerdwallet.com.

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8 Rules for Saving, Borrowing and Spending Money

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.

The best personal finance advice is tailored to your individual situation. That said, a few rules of thumb can cut through the confusion that often surrounds money decisions and help you build a solid financial foundation.

The following guidelines for saving, borrowing, spending and protecting your money are culled from nearly three decades of writing about personal finance.

1. Prioritize saving for retirement

In an ideal world, you’d start saving with your first paycheck and keep going until you’re ready to retire. You also wouldn’t touch that money until retirement. Even if you can’t save 15% of your pre-tax income for retirement, as recommended by Fidelity and other financial services firms, anything you put aside can help give you a more comfortable future. Aim to take full advantage of any company match you get from a 401(k) at work — that’s free money — and borrow against or cash out retirement funds only as a last resort.

2. Save for a rainy day

You may have read that you need an emergency fund equal to three to six months of expenses, but it can take years to save that much. That’s too long to put off other priorities, like saving for retirement. A starter emergency fund of $500 can be your first goal, and then you can build it up. While you’re saving, try to create other sources of emergency cash, such as a Roth IRA (you can pull out your contributions at any time without taxes or penalties), space on your credit cards or an unused home equity line of credit.

3. Save for college

Got kids? Open a 529 college savings plan and contribute at least the minimum, which is typically $15 to $25 a month. Retirement savings comes first, but anything you can save will reduce how much your child may need to borrow. Also, research shows the simple act of saving for college increases the chances that a child from a low- to moderate-income family will go to college.

4. Borrow smart for college

A college degree can pay off in higher earnings, but lenders may allow you to borrow far more than you can comfortably repay. If you’re borrowing for your own education, consider limiting your total debt to what you expect to make your first year out of school. If you’re a parent borrowing for a child’s education, aim for payments that are no more than 10% of your after-tax income and that still allow you to save for retirement. If your payments are higher than 10% of your after-tax income, investigate income-driven repayment plans that could bring down your costs.

5. Use credit cards as a convenience

Credit cards offer convenience and can protect you from fraud and disputes with merchants. But credit card interest tends to be high, so don’t carry credit card balances if you can avoid it. If you routinely pay your balances in full, look for a rewards card with a sign-up bonus that returns at least 1.5% of what you spend.

6. Finance your home smartly

If you want to be a homeowner, the best time to buy your first home is when you’re financially ready and in a position to stay put for a few years. Opt for a mortgage rate that’s fixed for as long as you plan to remain in the home, and don’t make extra payments against the principal until you’ve paid off all other debt and are on track for retirement.

7. Buy used vehicles and drive them for years

Buying a car right now isn’t a great idea; supply-chain kinks and other pandemic-related issues have inflated the cost of both new and used cars. In general, though, buying a used car can save you a ton of money over your driving lifetime, as can driving your car for many years before replacing it. These days, a well-maintained car can last 200,000 miles without major issues, according to J.D. Power. This means you can get roughly 13 years of service out of your car if you drive it 15,000 miles a year. Ideally, you would pay cash for cars. If you need to borrow, try to limit the term of your loan to a maximum of five years.

8. Insure against catastrophic expenses

Use insurance to protect yourself against catastrophic expenses rather than smaller costs that you can easily pay out of pocket. If you have sufficient savings, consider raising the deductibles on your policies to save money on premiums. Be careful about high-deductible health insurance policies, though. Having a high deductible could cause you to put off medical care, and it’s better to err on the side of safety when it comes to health.

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


Liz Weston writes for NerdWallet. Email: lweston@nerdwallet.com. Twitter: @lizweston.

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5 Key Numbers to Know About Savings Accounts

You don’t have to be a numbers person to have a healthy bank account. But when it comes to savings, knowing a few key figures can help you maximize your options. Here are five numbers that can help you determine if a savings account is ideal — or if it could cost you.

1. Minimum amount to open

Some banks require a minimum deposit to establish an account. The minimum requirement is typically $25 to $100, according to the Consumer Financial Protection Bureau, though there are accounts with a $1,000 or even $5,000 minimum. But if you have to save up just to open a particular savings account, that account might not be right for you. And there are plenty of savings accounts with no minimum to open.

To really benefit from savings, including having an adequate reserve for emergencies, you’ll want an account where you can easily manage the opening deposit so you can start making regular deposits and saving.

2. Interest rate

The interest rate is how much money your money earns while it sits in a savings account. For savings accounts, the interest you earn over a one-year period is often expressed as the annual percentage yield, or APY. So if you have $100 in an account and the interest rate is 1%, your money would earn $1 in interest. Over time, the interest earned in savings accounts also earns interest, something known as compound interest.

These days, many savings accounts earn low rates. According to the Federal Deposit Insurance Corp., the national average rate for savings is only 0.06%. But some of the best accounts have yields that are many times higher, with low (or no) minimum deposits.

Look for financial institutions that offer high interest rates compared with their competitors. The higher the interest rate, the faster your balance can grow.

3. Monthly fee

The monthly service fee is an important number to watch because it can work against your savings goals. Some financial institutions charge this fee, typically around $5 a month, for having a savings account open at their bank. But if you’re paying $5 a month, you’re paying $60 a year — money that you could be saving.

Some financial institutions may waive the fee for customers if they meet certain requirements, such as signing up for automatic deposits or keeping their balance above a certain amount (see #4 on this list). But many of the best savings accounts don’t charge these fees at all.

If you choose an account that has a monthly service fee, go for one whose fee you can easily waive.

4. Minimum amount to avoid a monthly fee

Many banks that charge a monthly fee will waive it if you keep a minimum balance throughout the month. A typical minimum daily balance — for a bank that has one — is $300. If you don’t want to have to keep track of a minimum daily balance, avoid the cost (and potential hassle) by simply putting your money in a savings account that does not charge a monthly fee.

5. Excess withdrawal limit

This is a fee that some banks and credit unions charge if you have too many withdrawals from your savings account each month. The transactions, known as convenient withdrawals, include online transfers, overdraft protection transfers and phone-initiated transfers.

A bank or credit union may charge a fee if you make more than six of these withdrawals in a month, typically around $5 to $10 for each excess transaction. The restriction was previously in place because of federal regulations. But in April 2020, the Federal Reserve gave institutions the ability to eliminate this limit and “allow their customers to make an unlimited number of convenient transfers and withdrawals from their savings.”

Many banks still charge this fee, however, so you’ll want to check with your financial institution about its policy.

Every saver can make the most of their savings account by staying on top of these five key numbers. They can help you minimize costs and maximize interest, so you can be well on your way to meeting your savings goals.


Margarette Burnette writes for NerdWallet. Email: mburnette@nerdwallet.com. Twitter: @Margarette.

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Viral Savings Challenges That Pay Off

Among the different ways to trick yourself into saving, money-saving challenges are some of the most engaging.

They can help you feel connected to finances by requiring frequent check-ins and debunking feelings of inadequacy when it comes to saving. For Cristina Brown, a self-described savings-challenge designer and founder of the blog Happy Savings Co, money-saving challenges helped her go from spending to saving.

“I recognized the need to save money, and I thought that this would be a good way to kind of gamify it,” Brown says.

If saving for tomorrow seems out of reach, the right money challenge can generate excitement, push competitive buttons and potentially increase savings.

Viral challenges that can add up

Before starting a savings challenge, review your budget to trim unnecessary expenses. The amount of breathing room in your budget will determine the level of difficulty that’s possible for a challenge.

Assigning a goal to a challenge may also keep you motivated and consistent, whether it be saving for an emergency fund, a vacation or something else.

A few popular challenges to consider include:

Keep the change challenges

Beginner-friendly $1 and $5 savings challenges allow for passive saving, which takes less effort and adopts an out-of-sight approach. For a designated amount of time, both challenges involve putting aside denominations of these bills that are left over from cash transactions.

Ezekiel Waisel, a certified financial planner at SHP Financial, a financial planning firm, tried the $5 challenge in 2016 and saved about $300 in a year for a round-trip flight. “I don’t use a lot of cash, so the fact that I even saved that much was pretty surprising to me,” he says.

The 52-week challenge

This challenge hikes up the savings by $1 weekly and requires you to actively save by budgeting for each week. In the first week you save $1, in the second week $2, and so on until the 52nd week. The challenge can also be reversed to start saving $52 in the first week and work downward, as is Brown’s preference in 2022. Either way, the challenge can save $1,378 in a year, enough to cover an emergency or a large purchase.

“At the end of the year with holidays — even with all of our best efforts of setting up sinking funds for the holidays and stuff like that — things can still get pretty tight, so I reversed the order to save the bigger amounts at the beginning of the year,” says Brown. A sinking fund holds money that’s earmarked for a specific goal or expense.

The 100 envelope challenge

This potentially lucrative and difficult money-saving challenge requires numbering 100 envelopes from one to 100, shuffling them and drawing one randomly every day. The number on the envelope drawn determines the amount of cash that must be saved. Drawing high numbers consecutively can prove difficult, so this challenge is ideal for those with more cash flow. If completed, it saves up to $5,050, but don’t hold money in envelopes too long. Keep it safe by designating a day every other week or monthly to deposit savings into a high-interest bank account.

The weather Wednesday challenge

For thrill-seekers with enough cash flow, this challenge can offer big savings with less predictability. On every Wednesday, for a year, save cash or make a deposit into a savings account based on the temperature in your city. If it’s 50 degrees, for instance, save $50. The challenge gets harder as it gets warmer, so it’s best to start in the winter when it’s more manageable.

No spend challenge

It’s as straightforward as it sounds: You commit to only spend on essentials over a certain period to save big. Some people even clean out their pantries to lower their grocery bills. The level of difficulty is subjective for this challenge, but it’s likely more sustainable over a short term.

Customize your own challenge

Modify a popular challenge to fit your needs by shortening or extending deadlines or the cadence of saving. For instance, you could stretch the 100 envelope challenge over 100 weeks (about 2 years) instead of days, if that’s more achievable. Brown also creates her own challenges. In one such challenge, she seeks discounts at the grocery store to stash savings for future goals. She says she saved a total of $3,560.58 in 2021 by juggling multiple challenges each month.

Learn what motivates you

Mastering a savings challenge involves understanding your motivations. Consider whether you’re motivated by big or small deposits, randomness or predictability, cash or electronic deposits, or active versus passive saving. If you’re unsure, try a few money-saving challenges to learn what works. Passive savings challenges like keep the change can lay a solid foundation for bigger challenges and savings.

“I think passive is a great starting point, and once you get comfortable and consistent with passive saving, you can then add or switch to an active savings model,” Waisel says.

Finding the right challenge may require trial and error, but even as you experiment you’ll likely save money in the process.

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


Melissa Lambarena writes for NerdWallet. Email: mlambarena@nerdwallet.com. Twitter: @LissaLambarena.

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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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4 Ways to Sustain Savings Habits From the Pandemic

Whether out of choice or necessity, many people spent less money in the last year and a half on things like entertainment, clothes and furniture. For some, that meant holding on to more of their income. If you were able to save some cash, you’ve set yourself up to withstand future financial crises, especially if you can continue saving.

Keep growing your bank balance with these four pandemic-driven saving habits.

1. Reevaluate spending

Consider whether some of the purchases you may have gone months without are necessary going forward. Or rethink how often you want to make them compared to before. For example, if you started to work from home, you might have saved money by making your lunch instead of eating out. If you return to the office, you could continue saving by bringing lunch from home at least a few times a week.

“Since we were all stuck at home, I didn’t have many opportunities to go shopping or dine out. So I saved the money,” says Vida DeOliver, a jewelry designer and owner of Vidart & Life Boutique, an online store based in Union, New Jersey. “I saved more during the pandemic than I had prior.”

DeOliver says these days, she has more in-person spending opportunities, but she’s keeping the saving habit. “When I go shopping, I ask myself if a purchase is really necessary, or if I could hold on to the money and save it for something I’d really like later,” she says.

2. Delay big-ticket purchases

Make yourself wait before committing to expensive purchases. At the beginning of the pandemic, out-of-stock inventory and supply challenges meant that some people didn’t have a choice about waiting before ordering big-ticket items such as kitchen appliances, furniture and electronics. But learning to wait before spending money can be a smart choice anytime, helping you avoid the kind of impulse that can upend savings plans.

“I always try to delay purchases for a few days to see if I really want something before I buy, but the pandemic shortages really helped me figure out what I needed and what could wait,” says Eric Chow, a podcaster and public relations professional in Union City, California. Today, he makes a point of waiting a few days before pressing the “buy” button on items large and small, from electronics to wallets. And then? “If I really want it, I’ll know it’s worth the wait, and if I don’t, I can forget about it and move on,” he says.

3. Keep saving easy with automation

If you were able to save during the early part of the pandemic, one reason may be that it didn’t require much effort. You stayed home. Voila — savings. You can keep saving a low-effort endeavor by using automatic transfers to move money into a savings account at regular intervals.

“Set up an automatic transfer so your savings funnels to a separate account each pay period. This way, your savings is the automatic priority. And it gets you accustomed to relying only on the remaining amount,” says Regan Ervin, an investment advisor and founder of Capital E Advisors in Leawood, Kansas.

4. Set clear emergency savings goals

The pandemic turned emergency savings from a hypothetical nice-to-have into a must-have. If you haven’t already, take a moment to seriously evaluate your essential expenses and set a clear emergency fund goal. Make it a habit to review your essential expenses regularly to see if you need to adjust your savings target.

A common guideline is to have three to six months’ worth of expenses saved for emergencies. If that seems daunting, start with a smaller goal — say, $500. Chip away at that goal as best you can, even if it’s in $5 increments.

You can grow your money in a high-yield savings account

You can grow your money with no extra effort if you put it in a high-yield savings account. The annual percentage yield on these accounts can be more than eight times higher than the national average of just 0.06% for savings accounts. At the low national rate, a deposit of $10,000 earns just $6 in interest after one year. But in a high-yield savings account that has a 0.50% APY rate, a deposit of $10,000 would grow by more than $50 in the same time period.

If you are fortunate enough to save money, adopting these habits can help you hold on to your funds and save even more, preparing you for whatever the future holds.

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


Margarette Burnette writes for NerdWallet. Email: mburnette@nerdwallet.com. Twitter: @Margarette.

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When Your Income Drops, Here’s How to Bounce Back

Losing income is never easy, but it’s become increasingly common over the last year and a half: According to the Pew Research Center, 44 percent of U.S. adults say their household has experienced either job loss (including temporarily) or a pay cut since the beginning of the pandemic, with Hispanic and Asian adults most likely to say so.

That creates an incredible strain as people scramble to cover basic expenses like food and housing as well as monthly bills and everyday expenses, even if the reduction in income is temporary. Having a sense of your budget and avoiding procrastination is the key to doing well post-pay cut, says certified financial planner Manisha Thakor, founder of MoneyZen, a financial educational consultancy in Portland, Oregon.

She says your odds of surviving and perhaps thriving go up exponentially “if you know your expenses beforehand, immediately acknowledge something bad has happened and you need to adjust them — and open your mind to the notion that it’s really likely that by downsizing, you could actually end up having a richer life.”

Acknowledge the emotions

“It’s OK to admit that it’s a crappy situation and you are going through it. I think a lot of people don’t give themselves that grace,” says Athena Valentine Lent, founder of the Money Smart Latina website.

There can be grief involved in losing income as you mourn your previous lifestyle, says Daisy Luther, founder of The Frugalite website. “I grew up in a well-to-do-family and never heard, ‘We can’t afford that,’ and then got divorced and I had to accept that my life had changed,” she says. She could no longer go out to pizza with her kids every Friday night, for example. Gym memberships and nail salon visits were out, too. She suggests giving yourself a set amount of time to feel sad and then start focusing on how you are going to move on.

Audit your spending

If you review all of your spending, Thakor says, then you can get tactical about which items to cut: “Anything you’re spending money on that doesn’t bring you joy, like cable bills, activities for kids, things that have crept into your life about ‘who looks the best?’ — just step out of that competition,” Thakor advises.

Lent adds that you can make trade-offs: “I might need the Internet but not cable. I need a phone, but not that extra stuff on the phone plan. I need groceries, but I don’t need to eat out. I don’t need Netflix, I can go to the library. Anything you don’t need to spend on, don’t spend it,” she says.

Zero in on food

Food is a major spending category for a lot of people, and it’s a prime target for cuts, says Valerie Rind, author of “Gold Diggers and Deadbeat Dads: True Stories of Friends, Family, and Financial Ruin,” who experienced a major income drop when she changed careers about 16 years ago. “I cut back on eating out, even though I like it and I’m not much of a cook,” she says. She also changed the way she shopped for groceries, bypassing the $4 orange juice and using a crock pot for more meals, which also generated leftovers for the freezer.

Recently, she has gotten inspiration for meals from TikTok chefs, who break down recipes in short video segments. “It makes things easy and simple,” she says, adding that her favorite chef is @thatdudecancook.

Adjust your expectations

Thakor suggests asking yourself if you could get by with less, such as whether you can trade in for more economical vehicles or consider having only one car. “People are driving more expensive cars than they can comfortably afford. Look at pre-owned certified cars,” she suggests. It’s easier to handle income loss, even a temporary one, without a large car payment each month.

Relish the challenge of being frugal

Luther suggests treating frugality like a game. When it comes to food, home decor or an accessory, she suggests asking yourself if you can make it for less than the cost of purchasing it.

“It really can be a lot of fun,” she says. She enjoys growing tomatoes and lettuce to make her own salads, which she estimates saves at least $10 a week.

Save up for next time

If you’ve had to deplete your emergency fund or don’t have one, consider deepening your cuts to allow savings that will cushion you in the next financial crisis. Thakor suggests a $2,000 emergency fund goal and then continuing to build — but even $500 can protect you from financial shocks.

“If you know you will be in a cash deficit in a few months, start stacking cash,” Lent says. Look for ways to make extra money, for example — perhaps ride-sharing, freelance work or selling items you no longer need, she adds.

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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A Garden’s Lessons for Growing Your Money

Soil, sun, water and seed: The ingredients of a garden are simple, but the final product is never guaranteed. Willing a plot of land into a vibrant state of bloom takes intention, know-how and no small amount of trial and error.

Like many people staying at home, I spent much of the past year tending to the soil of my yard and crafting a garden oasis of my own imagination. The work wasn’t easy, and I’m sure many now-dead plants wish that I’d been a little more proficient.

But as my vision came to life — and I realized the care that this new hobby requires — I saw parallels between tending to a garden and handling finances with intentionality.  Here’s what my garden taught me about managing money.

Have a vision

Before you put a spade into the ground — or sign up for a new financial instrument — define what you want to accomplish. Like a garden, your financial future can be a reflection of your passions and priorities.

“There are no rules — it’s your garden,” says Brooke Edmunds, associate professor of community horticulture with Oregon State University Extension. “Don’t be afraid to try new things. You’ll get so much joy out of the pride of growing things yourself.”

How you manage your money is an individual endeavor, too. “When imagining your goals, a good jumping-off point is defining your needs and your wants and what you value,” says Lacey Langford, a North Carolina-based financial coach. “Not everyone values the same thing. Some people might value a nice home or a nice car or retirement savings more.”

Understand that big goals can take years to accomplish. “Take the long-view approach,” Edmunds says. “It really takes five years or so to really see how plants are and to learn your garden space.”

Likewise, think about various aspects of your finances — debts, income, investments — and define what you want them to look like in five years. Do some self-reflection and sketch out the life you want. Then get started on bringing this vision to fruition.

Make growth easy

With goals defined, dig in and establish the right foundation for growth.

In a garden, this step means testing the soil to determine if it has the right components to support your specific plants. Developing the right soil can make the difference between a season of vigorous growth and a lackluster performance.

When it comes to managing money, think of the fundamentals — things like income, expenses and savings, as well as your attitudes and behavior toward money — as the soil. Your ambitions are the plants you put into the ground, hoping they’ll take root and thrive. Upon inspection, you may find that you’re primed for growth or that the soil needs amending.

Adjusting financial habits to meet an ambitious savings goal, like a down payment on a house, is one example. If you’re not able to save much after covering your current expenses, get creative and trim expenses or increase your income.

Next, turn to your attitudes and habits around money, says Kathleen Burns Kingsbury, a wealth psychology expert based in Vermont.

“I recommend people look at what lessons they learned growing up about managing money,” Burns Kingsbury says. “How have those beliefs about money impacted their behavior as adults? The foundational part is really looking at how these thoughts and beliefs impact your ability to make progress down this path.”

Reorienting attitudes toward money can help you meet your goals. For example, you may have been taught that debt should be avoided at all costs. You could reassess your thinking and explore ways to use debt as a financial tool with less risk. When paying for a major expense, a credit card that has a 0% annual-percentage-rate period could help you cover the cost while keeping your savings intact.

Put in the work

A green thumb or a certified financial planner certificate isn’t necessary to achieve your goals. Much like weeding, regularly chipping away at tasks is easier than trying to accomplish everything immediately.

“You don’t have to weed the entire garden in one day,” Burns Kingsbury says. “Take a small chunk and think about how to get rid of those weeds.”

Focus on regular tasks to nurture your finances. When paying off debt, for example, spend a day organizing accounts into a spreadsheet or using a debt tracker. The next day, choose a payoff path, like the debt snowball or debt avalanche method, then stick with it. Breaking tasks into small steps makes them easier to manage. The same is true when improving credit; making regular on-time payments will build your score over time.

“Your garden doesn’t have to be perfect, but stay on top of your weeds so they don’t affect the productivity of your garden,” Edmunds says.

Tending to a garden and managing finances are about marrying a bold vision with daily, incremental tasks to bring it to life.

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


Sean Pyles writes for NerdWallet. Email: spyles@nerdwallet.com. Twitter: @SeanPyles.

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