What Do You Devote Your To Money Once You Are Debt Free?

financial planning This is a post by Staff Writer Jeff, who blogs about sustainability and finances at Sustainablelifeblog.com and blogs about his efforts to earn a (semi) passive income online at Online Side Income.

In mid July, me (and my wife) hit a target we have been aiming for since 2009 – we are now debt free except for the house. I had one last student loan of mine that was hanging around like an annoying sibling, and after changing jobs and cashing out what was left of my vacation time, I used all those banked days to knock out the student loan once and for all.

We are very excited about this, as we know we are one step closer to freedom, and we have started working that much harder to earn it and make that day come even quicker. Previously, we were paying $400 a month to the student loan, and now we have gotten that all back – it’s time to invest, and here’s what we are going to do with it.

 

1. Max Out Both Roth IRAs for 2014

We have both been contributing monthly to these accounts, but we were not at the level to hit a yearly max. Each one of these accounts needs approximately $1,750 to reach the IRS limit of $5,500 for 2014, and we will be able to hit that now that we have freed up all this cash.

 

2. Pay down our Mortgage

While our mortgage isnt that large (it’s approximately 1 year of earnings for both of us) we would like to pay this down sooner rather than later as our mortgage payments eat up a very large chunk of our monthly nut – almost 80% of our monthly fixed expenses are from the mortgage alone, so once this is gone it will be nice in terms of cash flow. To pay this down, we will be increasing our payment frequency and our payment amount.

 

3. Ride Out Lower Paychecks

I switched jobs in June to a position where I was getting about 15% less in base pay, and paying approximately 750 more per month for health insurance. This has resulted in a take home income of almost $1,100 less on my side per month, which we have been able to manage fine (mainly because we have very little debt). However, since my wife and I had a child earlier this year, she will only be going back to work part time come fall, and income from her side of the equation will go down about 33%. All told, we are going to see an income reduction of about 25k per year starting in 2015.

 

4. Invest the remainder in a Tax Advantaged Account

We continue to save diligently for our goals and have a 3 month emergency fund that we are slowly building as well. We are going to start putting money into a tax advantaged account (probably my wife’s 457 plan) as well.

This is our plan to build our savings and investments, fund our retirement and pay down our mortgage now that we are out of debt. All of these small goals will help us fuel our larger goals in life, which we are talking about pretty much on a daily basis at this point, and I will reveal on my blog soon.

How about you all? What are your plans for when you become debt free except the mortgage? If you have already reached that point, what are you doing with your money?

Share your experiences by commenting below! 

***Image Source: Flickr

Does Online and Mobile Banking Excite Or Scare You?

mobile phone apps mobile payments mobile banking banking The following post is by MPFJ staff writer, Grayson Bell. Grayson, who runs the finance blog Debt Roundup, is a fan of personal finance, brewing beer, and working on cars.

More than two-thirds of the American public have basic banking privileges.

This means they have access to a bank or credit union to store their hard-earned cash. Yet with a majority of the population having bank accounts, why are many not utilizing online/mobile banking? According to the Pew Research Center, just 61 percent of internet users bank online, while only 35 percent of cell phone users bank using their phones. What is it about these services that scare us? This begs the question: Does mobile banking excite or scare you?

 

The Pros of Online/Mobile Banking

There are many advantages to online banking. Most are based around use and convenience for the account holder. There are also some advantages for banks to use such a service, mainly surrounding cost reduction. Here are some basic pros to using online banking.

  • Quick Access – You can easily check your balance or see recent transactions with a few clicks of your mouse or swipe of your finger. With our account information available when we need it, we can be more informed. You can even transfer money to other people or accounts with ease.
  • Better Rates – When you bank strictly online, you will most likely get a better rate on your checking or savings account. You can even get better loan rates. Online only banks can provide their customers with higher rates because they have less overhead.
  • Convenience – You can now deposit a check without even driving to the bank. If you have a smartphone with a camera, then you might have the ability to deposit your check right from your couch. Most banks have mobile apps for this feature.

These pros translate to both online and mobile banking. As long as you have an internet connection or mobile data, you can be connected with your money at any time.

 

The Cons of Online/Mobile Banking

I am the type of person who doesn’t see too many issues with online banking. That said, I realize there is one big con for online/mobile banking and that is undoubtedly security. With massive data breaches from sites like Target and other retailers, we have to be very careful about our financial data.

When we get too careless, we tend to make mistakes. When people ask me about how I do my banking and I tell them I haven’t stepped foot in a bank in a long time, they look at me funny. I don’t have much need for my traditional bank. They hold my money for me and it is FDIC insured, so why worry about it? After they stopped looking at me in a funny manner, I tell them about how I try to keep my information secure. My main defense is keeping my passwords regularly updated and hard to crack. Sometimes they are so hard to crack that I forget them.

The other way I protect myself is by having money in different banks with different usernames and passwords. Yes, it requires more time for me to manage my money, but it is less likely I will be the victim of total loss because my money is spread out. When I use mobile banking, I make sure to never have the mobile app remember my username. I also have a security pin to unlock my phone. These are just small steps I can take to protect myself and make it harder to hackers or criminals to get access to my financial data.

 

Are You Excited or Scared by Online/Mobile Banking?

This question is more geared toward those who haven’t jumped into online/mobile banking. What is stopping you? Is it the lack of knowledge on how to do basic bank transactions online or via your phone? Does the advancement of technology scare you or make you feel intimidated?

As more and more of our financial lives move into the online space, we have to be cognizant about our security. It is extremely hard to get back on your feet from fraud. Since fraud just continues to rise each and every year, we have to be prepared. That doesn’t mean we should shy away from advancement or be slow to adopt new changes. Online and mobile banking are here to stay and taking the time to understand the security and how to protect your information is the key to enjoy the full benefits.

How about you all? Do you fully utilize online and/or mobile banking? Have you ever been a little scared of fully utilizing all of the tools due to security purposes?

Share your experiences by commenting below! 

***Photo courtesy of http://www.flickr.com/photos/84335369@N00/6791147275/

Strategies To Help You Choose Health Insurance When Taking A New Job

health insurance graduate school The following post is by MPFJ staff writer, Melissa Batai.  Melissa is a freelance writer who covers topics ranging from personal finance to business to organics to food.  She blogs at Mom’s Plans where she shares her family’s journey to healthier living and paying down debt.

My husband recently took a new job in Arizona.  We’re from Illinois, so the move itself was a big deal.  After the headache of packing up and moving halfway across the country, I discovered we had several other obstacles.

Namely, I couldn’t believe how complicated picking a new health insurance plan was.  We were faced with three choices–a health savings account (HSA), an EPO (similar to an HMO), and a PPO.  After we made that decision, we then had to choose between four insurance companies to meet our needs.  Geesh!  I don’t remember it being this complicated when I started my full-time job 14 years ago.

If you, too, are faced with choosing a health insurance policy from a new employee, consider using some of these strategies that made our decision making process a little bit easier:

 

What Providers Are Included?

If you’re new job doesn’t involve moving from your current location, you may want to give preference to the plan that lets you keep your current provider, assuming you like your doctor and are comfortable with the services offered.

We had to get a new doctor anyway since we’re new to the area, so this had very little weight in our decision.

 

What Are Your Own Biases?

My husband and I were trying to decide between the EPO and PPO plan.  Initially I was drawn to the PPO plan because I had heard bad things over the years about HMOs.  I had concerns because the EPO wouldn’t cover providers who were out of network, and I had heard that HMOs can sometimes not be a wise choice if critical injuries or illnesses occur.  Sometimes it can be difficult to get the treatment needed.

I entered the decision making process with a strong bias while my husband entered it with an open mind.  In retrospect, the decision making process would have been easier if I’d been a bit more open-minded.

 

Talk to Others Who’ve Used the Insurance

I called Human Resources for more information about the insurance plans.  The woman I talked to had been using the EPO for the past 10 years and had had no problems.  She highly recommended it.

When I called an independent insurance agent for homeowner’s insurance, she mentioned that her husband also worked where my husband’s got his new job.  I took the time to ask her what insurance plan she and her husband had chosen.  They’ve used the EPO for the past 12 years and have had no problems.  The insurance agent had even had a serious heart problem and a pacemaker installed, and the EPO covered her entire expense.  She paid nothing out of pocket.

Talking to others to get their opinion about the insurance coverage can help you choose which plan you’d like and make you feel more comfortable with the decision you make.

 

How Much Does the Plan Cost?

Although it can be tedious, take the time to do a side-by-side comparison on the policies you’re deciding between.  When I did this exercise, I was shocked!

The PPO would cost us over $6,500 per year in premiums alone!  Then, there was a $1,000 in-network and $2,500 out-of-network deductible to meet per year.

The EPO, on the other hand, would only cost us $2,200 per year in premiums.  There were no yearly deductibles to meet.

Both plans had the same co-pays for doctor’s appointments, prescriptions, and other expenses.

 

Do You Have any Special Needs?

You’ll want to consider your own unique issues.  For instance, if you and your spouse want to start a family, you may want to consider a plan that has the best maternity coverage.  If you are having trouble conceiving, you may want to choose the plan that has the most generous plan for fertility specialists.

Consider your own unique medical issues and look for the plan that best suits your needs.

In our case, my oldest son and I are dealing with food intolerances and see a specialist to treat the issues.  The EPO plan wouldn’t cover these expenses at all.  The PPO plan would cover them at 50%.  Still, even though the EPO wouldn’t cover the expenses, choosing an EPO and paying out of pocket for these expenses would still cost less than going with the PPO due to the high premium expense of the PPO.

 

Are There Any Tax Implications?

The plan you choose may have tax implications.  For instance, if you choose a health savings account (HSA), you reap several tax advantages.  The money to fund your account is taken out of pre-tax dollars.  The interest on the account accumulates tax deferred.  Finally, you don’t have to pay taxes when you withdraw the money for qualified health expenses.

However, when you withdraw the money for qualified health expenses, you need to put the withdrawal amount as “other income” on your tax return.  Before choosing a HSA, check the tax implications with your accountant.

 

Look Into More Ways to Save

Regardless of what plan you choose, you can always opt for a flexible spending account (FSA) or a health savings account (HSA) to help you pay qualifying out-of-pocket expenses.  (To qualify for a HSA you must have a yearly deductible of $1,200 or more.)  There are benefits and drawbacks to both.

The FSA works with any insurance plan, and the money is taken out from pre-tax dollars.  However, whatever money that you do not use by the end of the year is taken by the government.

The HSA, like the FSA, is funded through pre-tax dollars.  On the other hand, unlike the FSA, the balance continues to roll over year after year.  However, if you don’t have a high enough deductible, you will not be able to use an HSA.

 

Consider Other Alternatives

Unfortunately, not all employer based health insurance plans are created equal.  A friend of mine chose not to go with his employer’s insurance because the premiums are $10,000 a year, and the deductible is $5,000 per year!  He and his family simply could not afford to pay up to $15,000 a year out of pocket for health care.

In this situation, some people have looked at Christian-based health savings plans.  These plans are not health insurance per se.  Instead, members pay a standard amount every month (usually $350 to $500 depending on your family’s size and health), which goes to pay other members’ health care needs.  When you have health care needs, other members send their monthly payment to you for your expenses.  Those who join this kind of plan are exempted from the Obamacare penalty.

 

You Can Always Switch

While choosing a health insurance plan is a big decision, keep in mind you can always switch plans during the open enrollment period.  If you have one plan that you don’t care for, you can try out another one for a year.

 

Our Decision

Ultimately, we couldn’t ignore the high price difference between the two plans.  We decided to go with the EPO to save nearly $5,000 a year on premiums and deductibles.

The decision was much easier after I talked to two people who had no complaints about the plan, including one who had faced serious health issues.

How about you all? What other factors go into your decision when choosing a health insurance plan with a new employer?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/68751915@N05/6793821977/

5 Ways To Save On College Expenses

student loans student loan payoff tips student debt saving money college The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.

As college prices continue to rise, students really need to focus on keeping costs down so that they don’t owe back monster loan amounts when they graduate. The fewer loans the student can get away with, the better they typically fair in life.

So what are some quality ways that students can save on their college expenses?

 

1) Live at Home

Many college students balk at the thought of living at home. According to them, “College is about independence and learning how to live on your own.” Well, somewhat, yes. But, if you talk to many grads that are struggling to pay back their student loans, their typical advice is to “live with your parents as long as you can.”

Living at home is not all bad. Most of the days you will be on the college campus anyway, and if you want the “college experience” you can always visit your friends that are living on campus. By avoiding the dorm life, you can save upwards of $10,000 per year! Over the course of four years, that’s $40,000! That’s a pretty huge savings if you ask me. Well worth the sacrifice.

 

2) Do Without the Car

The next largest expense when you’re at school is that car you’re driving around. You have to insure it, put gas in it, and pay for all the repairs that are inevitable. Often times, even if you own the car outright, you can spend $400 or more per month.

If you can get by with a bicycle, do it. Bum rides from your friends (you can throw them a couple bucks here and there) and stop taking senseless trips off campus. The savings will be quite noticeable.

 

3) Don’t Buy the Textbooks

Many colleges are still requiring you to buy the textbooks for your classes, but often times the professors cover everything that’s necessary anyway, which means that you could easily do without it. If you are required to answer questions at the end of each chapter, find the book in the campus library and make a free copy of those pages. Either that, or just borrow the book from your friend. By avoiding these purchases, you can save $500 or more per semester.

 

4) Keep Applying for those Scholarships

Quite a few students apply for scholarships before their freshman year, but then don’t bother to search out scholarships after that. There are so many funds that are designated for sophomores, juniors, and seniors that you should make a point to continue applying! A thousand dollars here and there can really help out a ton in the grand scheme of things. You’ll be glad that you got some of these scholarships when it comes time to pay for your student loans.

 

5) Learn to Buy Cheap Food

Believe it or not, pizza is really not all that cheap. If you are spending $10 on a pizza and devouring it in one or two sittings, then you are still spending $5-10 per meal! Instead of ordering pizza from the local restaurant, buy some cheap foods from the grocery stores – items like bread, tuna, eggs, pasta, rice, canned beans and corn, etc. Also, keep your eyes peeled for functions around campus that offer free food. After all, you can’t beat free.

How about you all? What other ways can you think of to save on college expenses?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/smemon/5188351708/in/

Everything You Need To Know To Get A Peer To Peer Loan

peer to peer loans p2p lending p2p The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of Fine Tuned Finances. She has backgrounds in personal finance, sales, and real estate.

Peer to peer lending is an alternate funding method that is becoming increasingly popular across the United States.

This lending method is funded by individual investors willing to provide money for loans in return for an attractive interest rate on the money they invest in the loans. Peer to peer loans may be a viable alternative if you are unable to obtain a loan from a traditional bank or lender. Once obtained, the funds can be used for anything the borrower desires, including paying off high interest debt, purchasing a vehicle, or starting a business.

Peer to peer loans are often cheaper for borrowers than traditional loans. These loans allow borrowers to bypass the banks, which often have higher fees, higher interest rates, and lower loan limits for their loans. Investors earn a higher return on their money than they would using many of the saving options available at traditional banks, supplying borrowers with a large pool of investors willing to fund their loans. This keeps interest rates reasonable and payments low for borrowers.

 

Peer To Peer Lending Companies

Prosper.com

Prosper.com was one of the first players in the peer to peer lending industry. All of the loans made through the company are fixed rate loans with terms lasting either three or five years. Prosper’s website advertises a 6.73 percent starting APR for the best borrowers, meaning the borrowers with the highest credit scores. According to the website of the Better Business Bureau, Prosper has recently received an A+ rating from the rating agency.

 

LendingClub.com

LendingClub.com was founded shortly after Prosper.com. The company has helped thousands of borrowers secure millions of dollars in loans from private investors over the years. During Lending Club’s first year of operation, it facilitated more than $3.5 million in loans. That figure has since grown to $3.4 billion annually. LendingClub offers personal loan amounts up to $35,000 and interest rates as low as 6.78 percent on loans with terms of three or five years.

 

FundingCircle.com

FundingCircle.com is another popular peer to peer lending business. The company specializes in small business loans to finance expansions, inventory purchases, marketing launches, and the hiring of new employees. The company offers loans up to $500,000 at interest rates of little more than 9 percent for borrowers with excellent credit. The term of the loan can be three, four, or five years.

 

Obtaining A Peer To Peer Loan

Securing a peer to peer loan is easier than you may think. The first step in the application process is providing your personal information to the peer to peer lending company so a credit check can be performed. Most companies offering peer to peer loans require applicants to have a credit score of at least 600. The minimum credit score for both Lending Club and Prosper is 640. Funding Circle uses a complicated calculation process designed to determine the company’s ability to repay the requested loan.

Before applying for a peer to peer loan, make sure that your credit score is as high as possible so you will get the best rate for your loan. Obtain your credit report and go over it with a fine toothed comb for any errors that could be bringing down your credit score. You can obtain a free copy of your credit report from each of the three major credit bureaus annually from www.annualcreditreport.com.

Correcting errors on your credit report can increase your credit score by a significant amount. These errors could include someone else’s information combined with your own, missed payment entries for payments you know were made on time, or accounts in your name that you did not open. If any errors are found, you should alert the credit bureau that issued the report immediately to get the process started for removing that information from your credit report.

You will also be asked to disclose your debt to income ratio so the underwriters can determine your ability to repay the loan you are requesting, so it is important to reduce your debt to income ratio as much as you can before applying for the loan. After your personal and information has been reviewed, your request will be assigned a score based on your perceived credit-worthiness, essentially a credit score for the website. This score is typically displayed in the form of a letter grade, with AA or A1 ratings equaling the best ratings down to E or G1 ratings for riskier borrowers. The rating you receive determines the interest rate that you will be charged for the loan and the interest rate that the lenders will receive for funding your loan.

In order to obtain the loan, you must provide the peer to peer lending company with a valid bank account number. The requested funds will be deposited into this bank account and the payments for the loan will be automatically withdrawn from this account on the payment due date each month. Your loan may be completely funded by a single lender or divided into smaller portions by multiple lenders. Regardless of the number of people that fund your loan, you will make a single payment to the peer to peer lending company that facilitated the loan. That payment is then divided into the accounts of the investors that funded your loan.

 

Final Tips

In order to ensure that the peer to peer loan process goes as smoothly as possible, fill out the requested information completely and honestly. The information you provide will be scrutinized and any potential errors can hold up the process or result in your application being rejected. Depending on the funding process, it could take a couple days or a couple weeks for your loan to be entirely funded. Make sure that you read all of the terms and conditions associated with the loan so you will know how much you will pay in fees and interest as well as when the monthly payments will be taken out of your bank account.

How about you all? Have you obtained a peer to peer loan from one of these companies?

Share your experiences by commenting below! 

***Photo courtesy of http://pixabay.com/en/hand-finger-thumb-high-positive-105725/