August 28, 2014

Freedom from Student Loans

Credit: ddpavumba
While reading an article recently published in InvestmentNews, I was surprised to learn that 71% of college graduates coming out of school with a bachelor’s degree have student loan debt. I was also surprised to learn that student loan debt has passed credit card debt and is now the largest form of consumer debt after home mortgages. When considering the 71% of college graduates with student loan debt, the average debt is close to $30,000!

I knew student loan debt was a burden for many people, but I’ll be honest, I didn’t have any idea that it impacted nearly three out of four college graduates. I was also a little shocked by the magnitude of the average debt. So, what if you’re like the majority of college graduates out there, and you’ve got some significant student loan debt relative to your current salary weighing you down? What should you do? I’d like to share some thoughts.

If it were me, I’d get a job after college graduation as quickly as I possibly could. Even if it was not my ideal job and was just a short-term opportunity, I’d want some income so that I could hopefully avoid taking on any additional debt and maybe even begin to think about attacking my student loan debt principal. 

If it were me, I’d look into consolidating my student loans (if I had more than one) so that they would be easier to manage. One check per month would feel less overwhelming, and the interest rate on the consolidated loan could even be beneficial.

If it were me, I’d obviously keep making minimum payments on my student loan debt, but I’d set aside a reasonable cash emergency fund, I’d contribute whatever it took to get my employer’s maximum company match to my 401(k) or retirement plan, and I’d pay down any credit card debt I had before attacking my student loan debt principal. My goal would certainly be to get my student loan debt paid off, but I need to make sure I can survive a “rainy day” and go ahead and begin saving for my retirement, as retirement dollars contributed now have a longer time frame to really appreciate than retirement dollars contributed years from now. After I had my rainy day fund built up, my retirement contributions in order, and my credit card debt zeroed out, it would be full-fledged war on my student loan principal until I was able to remove the giant debt stone that had been tied around my neck as I pursued a higher education and a brighter future.

While I’d do everything I could to eliminate my debt burden, I wouldn’t put my life totally on hold. I admire and respect people who are focused on extinguishing their student loan debt as soon as possible, but putting off things such as getting married, renting your own apartment, and buying a reliable car in the name of paying down student loan debt may not be the best life choice. It may be the best financial choice, but it may not be the best life choice. Do whatever you think is best, but I wouldn’t put off taking the next steps in your life and move back in with your parents solely so you can live as inexpensively as possible and pay down your student loan debt as soon as possible.

I understand that some members of my generation aren’t yet interested in my ramblings about investing, insurance, and estate planning because they are still battling their student loans, but that doesn’t mean I can’t help. Get a job, set aside some cash, start contributing to your employer’s retirement plan, and live thriftily so that you can pay off your student loans as soon as reasonably possible, but don’t “postpone” your life. Once you’re free from your student loans, you’ll have a lot more cash flow free up, and you’ll be ready to take flight towards your other financial and life goals.


August 19, 2014

Current Documents - It Does a Family Good

Credit: Ambro
Have you ever looked in the fridge and been really glad that you had a nice gallon of milk just sitting there? Not to get too crazy, but a gallon of milk kind of proudly stands out in a refrigerator with its crisp labelling, unusual shape, and pristine coloring. There’s just something about knowing that it’s there that can put a smile on your face. If you want cereal, it’s there, if you need to bake something, it’s there, and if you need something to wash down more Oreos than you would care to admit, it’s there.

There’s another scenario, though, and it’s one of my least favorite. Have you ever opened a gallon of milk and given it that customary sniff, just to make sure everything is as it should be, and had your nostrils greeted with the deplorable, putrid, sour smell of rot? Have you ever gone to the trouble of reaching up in the cabinets to retrieve your favorite glass and gone ahead and poured a glass of milk (bypassing the customary sniff test) only to find the inside of your mouth wrenching after that first gulp of spoiled milk? I know I have damaged my nostrils and angered my taste buds doing just that on more than one occasion, and it’s no good. You need milk, and unless you’re a two-gallon kind of family, you’re usually just out of luck. All you can do is pour the expired product down the drain, put the lid back on the jug so it doesn’t stink up your garbage, and head to the trash can.

Unfortunately, I’ve seen some estate planning and health care documents that resemble spoiled milk. They were originally done oh so well. They were crisp documents done by prestigious lawyers, they were printed on the obnoxious, extra-large-sized legal paper, and they were kept in a nice little binder in the family’s safety deposit box or the bottom of a dresser drawer. The documents were like a good gallon of milk – they were there if you needed them. However, time passes. Family relationships and dynamics change. Agents, guardians, and executors pass away themselves or lose their desire or capability to assist you. Minor children become adults and have children themselves. Financial institutions and governments change the wording required for everything to work as it was so intended. Any or all of these events can take a perfectly good set of estate planning or health care documents and spoil them. This will likely go unnoticed (just like a capped gallon of expired milk in a fridge), but when someone gets hurt or passes away and the documents are needed (just like a glass of milk to wash down a peanut butter sandwich), the documents can really stink and show just how "expired" they really are.

Wills, power of attorneys, health care directives, and beneficiary designations are a lot more important than a dairy product. When someone gets sick or passes away they can’t just pour their old documents down the drain and get fresh ones. Their family could be legally required to drink the cup that is put before them based on their loved one's most recent estate planning and health care documents no matter how old they are, even if the family knows it is not what the deceased or incapacitated wanted or intended. I’m not trying to make anyone spend a bunch of money on attorney fees, but if you pull your documents and see that they have cobwebs on them, you may want to consider getting them updated. If you’ve recently had children or become a grandparent, if a family dynamic has seriously changed, if a key person in your documents such as a primary or contingent agent or beneficiary is no longer with us, or if your documents are more than about five years old, it may be about time to get your documents updated.

If you don’t have any documents at all, consider this your proverbial kick in the you-know-what. Living without proper documents in place is a lot crazier than not having milk in your refrigerator!
It wasn’t something I particularly enjoyed, but my family and I have our estate planning and health care affairs in order, and that gives my wife and me a sense of comfort and confidence. I can focus on other things, such as running to the store for a gallon of milk and maybe, just maybe, a pack of Oreos.


August 05, 2014

Summer Jobs, Life Lessons

Credit: foto76
Some of you may recall that my very first 2MuchCents blog post had to do with how my high school job as a dry cleaner taught me how to view the world in terms of cheeseburgers. It taught me that it took an hour of folding pants, hanging up shirts, performing maintenance on the machines, and sweeping the floors to earn $5.15, and that could buy around five cheeseburgers. You and I may both laugh at that now, but at fifteen, it’s not that weird for a boy to think of cheeseburgers as a currency or unit of measure. Either way, when I started viewing all of my purchases and expenses in terms of cheeseburgers, and the corresponding pants-folding, shirt-hanging, maintenance, and sweeping required to purchase those cheeseburgers, my outlook on the real world was forever changed. My experience as a dry cleaner really did teach me a real-world appreciation for having to work so that I could earn enough money to cover my expenses and buy what I wanted, but it also taught me so much more.
  • I learned that if I worked harder while I was at work, I would get to go home sooner.
  • I learned that if I worked a lot, I got a bigger check, but that it wasn’t always worth it.
  • I learned that admitting that I was the one who left the blue pen in the suit jacket that was now ruined didn’t help my boss’s short-term opinion of me, but it helped cement my integrity with my boss and my co-workers.
  • I learned that not stepping in the same hole twice and leaving more pens in suit jackets was a wise choice.
  • I learned that, most of the time, greeting people with a firm handshake and looking them in the eye garnered me a little more respect in their book.
  • I learned that a “How are you?” and a “Have a good day!” are worth the effort.
  • I learned that putting your buddy in a dryer is a great idea, but letting your buddy put you in a dryer is a terrible idea.
  • I learned that following through on what I said I was going to do when I said I was going to do it was the single most important thing I could do.
  • I learned that the customer is not always right, but they are always the customer.
  • I learned what “sweat equity” was.
  • I learned that if I worked hard and well, I would get raises, and I would gain keys to work at other store locations with less and less supervision.
  • I learned that getting to know your co-workers and checking on them when they’re down makes your workplace a lot more enjoyable for you and for them.
  • I learned the importance of being careful with transactions so that my cash drawer would balance at the end of the day.
  • I learned that what types of clothes you wear don’t necessarily mean you are rich or poor or nice or heinous.
  • I learned that the world was a pretty small place and that I would cross paths with many of the people I waited on in other facets of life.

If you’re finishing up your summer job, I encourage you to reflect on what you’ve learned. If you didn’t work this summer or haven’t worked (and you’re old enough to sit behind a steering wheel), I can’t tell you how important it is that you get a job for your future and your personal development, whether it’s temporary or long-term and whether you like it or not. As the great Vince Lombardi once said, “The dictionary is the only place that success comes before work. Work is the key to success, and hard work can help you accomplish anything.”