Jeremy Fulton, Financial Wellness Coach

Tag: loan

  • How to get more money in your paycheck without working more!

    How to get more money in your paycheck without working more!

    All of us would like to bring home more money for the work we do.  I discovered an easy, legal and simple way to boost your paycheck, without taking more overtime!  If you want to learn what I learned, keep reading.

    Back before I learned this method, I was missing out on several hundred dollars every month!  I look back now and wonder how much more I could have invested, how much faster I could have paid down my debt, how much more I could have saved for trips and ‘toys.’

    What I found out was that I was loaning the Federal Government hundreds of dollars a month at 0% interest!  I bet that you are doing the same thing.  How do I know?

    Almost everyone that I’ve talked to over the years gets a hefty tax refund this time of year.  They look forward to it.  They are happy that they get a huge check.

    What they don’t realize is that it’s not free money, but money that they overpaid to the IRS!  And like I used to do, they tend to blow most, if not all, of it on spontaneous unplanned spending.

    Wouldn’t you rather be able to use that money as you earned it?  Or at least put it in a savings account to earn some interest?  What financial goals are you working towards now, that having this additional income would help you achieve?

    Now for the action part.  There are many W-4 calculators online, including the official IRS one; you can even ask your HR department or CPA for assistance.  Once you have calculated your new withholding amount, fill out a new W-4 and submit it to your HR department.

    The goal is to have as small a refund as possible ($100-200) without owing anything.

    So, how much more will you get out of your next paycheck?  Encourage others with your results!

  • My Confession To You

    My Confession To You

    I am not perfect

    No surprise, right?

    I am not perfect with money

    There, I said it. It’s true. Even though I’m a Financial Wellness Coach I am prone to making mistakes and not enjoying everything I have to do to succeed with money.

    Sometimes the only thing keeping me from raiding my emergency fund for new camera gear is my wife.

    Sometimes I don’t want to spend the time saving for something and get a credit card to get it now.

    Sometimes I forget to write my budget before the first of the month.

    Sometimes I get a credit card offer in the mail with a “great” points system and think that I could get free stuff and not develop bad spending habits.

    Sometimes I see Amazon.com’s offer of free money to sign up for their card and want to “take advantage” of the offer.

    Sometimes I overspend a budget category.

    Sometimes I forget to pull out cash to use for our grocery budget and use the debit card, hoping I don’t overspend the budget.

    Sometimes I want to not invest 15% of my income for the future and enjoy my hard work today.

    Sometimes I don’t want to act like an adult.

    But I am an adult

    And my wife & future child depend on me being responsible. Sometimes when I do what is right, its not because it’s fun, easy, or makes me feel good. It’s because as an adult I force myself to see beyond myself, beyond now, beyond how I feel.

    When I make a mistake, I look at the WHY. I try to learn the cause of it and change my behavior/habits to not make the same mistake twice.

    What keeps me on the straight and narrow, financially?

    My wife, first of all. She is my accountability partner and any mistakes I make will be known and addressed (with love and forgiveness).

    You all; Writing, teaching, and coaching about responsible personal financial actions & habits forces me to do the right thing. I know that the moment I sign up for a credit card or car loan, my credibility with you is lost, maybe forever! I would not trust a coach who acted opposite of the way he/she coached.

    What do you struggle with? How do you overcome those struggles?

  • The 5 ‘best’ reasons to buy a new car

    The 5 ‘best’ reasons to buy a new car

    Let’s face it; there’s nothing like driving off the lot in a brand new car!  The new-car smell, the fit & finish inside feel luxurious, no strange noises, and everyone is noticing you and your new ride!

    So, what are the 5 ‘best’ reasons to buy a new car?

    5. I’ll impress my friends and strangers with a new car.
    Have you ever seen a brand new Kia or Honda on the road and said to yourself, “Wow!  Someday I hope to be as successful as that person!”  Me either.  So, unless  you are buying a Ferrari, I probably won’t give your shiny new car a second look.  And do you really care what some stranger you’ll never see again thinks?  And if you want to impress your friend, buying them dinner or clearing the snow from their driveway will do a much better job!

    4. I’m always going to have a car payment, so why not get a nice, new car?I haven’t had a car payment since 2008; and the last two cars I bought were fully loaded cars in good shape and still very nice inside.  I’m not rich, nor did I have tens of thousands of dollars saved up; I paid under $4000 each; that’s only 8.5 car payments!  There are lots of reliable, nice cars out there that you can save up for in a reasonable time frame.

    3. I want to save money on gas, so I need a more fuel efficient car.
    Yes, new cars tend to be more fuel efficient than a comparable old one.  So, you could end up saving at the pump.  But that is where the savings end.  The average car payment in America is $471; will you be saving that much every month in fuel?  Unless you trade in your Mac truck for a Honda Civic, I doubt it.

    Maybe it’s not your savings, but you are trying to be more environmentally conscious  with your MPG boost.  Will you reduce greenhouse gasses enough to offset those created by manufacturing your new car (mining the metals, pumping the oil for the plastics, the heavy metals & toxic waste created because of the electronics)?

    2. We are having a baby, so we need a safe car.
    Really?  When your 10 year old car rolled off the assembly line it surpassed all the safety requirements and whoever bought it then didn’t think it was unsafe.  Has your car become un-safe over time?  If you think so, have a qualified mechanic inspect it and replace aging components.  It will be much less expensive than even 2 car payments!

    1. I need a reliable car; old cars break down all the time.
    Yes, old cars tend to have failures more often than new cars.  Parts wear out and fail over time.  But is it really that bad?  Suppose you just had to replace the transmission at $2000.  That is a LOT of money, I agree.  But how often have you actually had your car break down and leave you stranded?  And $2000 is only about 5 car payments, and is easily covered by your emergency fund.  And a rental car is only about $20-30 a day while your car is in the shop.  The key to a reliable car is not age, but keeping up with maintenance.  Replacing parts before they fail and performing routine maintenance will keep your car running for many more years.

    Now, it is possible that your car will need a very expensive repair (such as a transmission) and you are wondering if it is worth putting that much money back into your car.  Here is a simple way to determine if it’s time to upgrade: If the value of the car as-is (in it’s broken state) plus the cost of repairs is more than the value of the car repaired, it’s time to replace it.  Sell it for what you can get for it and buy a newer, used car, for cash.

    So, why am I so against new cars and car payments?

    • Cars are depreciable assets.  They lose 10% the moment you pull out of the lot, and over 60% in 5 years.  Let someone else take the big hit and buy a 2-5 year old car.
    • $471/month.  That equals almost $40,000 in 5 years if invested instead; Invest that for 5 years starting at age 20, and that’s $2.6 million at retirement!!!  Investing it monthly for your entire working career results in $7.2 million!  Is that new car smell really worth that much?
    • Contentment.  Yes, I like new stuff, new gadgets, cars, etc.  But driving an older car can help teach you to be content with what you have and not worry about what the Jones’s think.

    What reasons do you have to buy a new car?  Or not buy one?

  • 6 reasons why now is the perfect time to buy a home

    6 reasons why now is the perfect time to buy a home

    Its a new year.  Things are going to be different this year!  You have set goals for yourself, your family, and your career.  But there is one thing that is still bugging you.

    You feel like you are still throwing money away every time you write out that rent check.

    “I could be building equity in my own home, not having to live in this crowded apartment building, and not having to worry about the rent going up, again.”

    If this is you, now could be the perfect time to buy your first home!

    1. 2.93% APR
    Rates can’t drop much more than that for a 15 year fixed rate mortgage!  Many analysts think that the rates will be increasing in the next 3-12 months.  Why didn’t I quote the 30 year rate? Because you should stay away!  Not only is it a point higher, but you will end up paying a LOT more in interest charges over the life of the loan.  And besides, who wants to be in debt for 30 years?

    2. Weak housing market (at least in CT)
    Home prices are still down, but the market is improving!  This could be unlike any other time in history or the future for prepared homebuyers!  Opportunity favors the prepared!

    3. You’ve lived in the area you want to buy in for a while
    Learn from my mistakes, don’t pick an area to buy in until you know the area a bit.  Where will you be spending your time?  Are there areas you want to live at a distance from? Close to?  Where do you work and socialize?  If you live too far, you can end up feeling isolated, or end up spending more in fuel than you anticipated driving all over.

    4. You have a down payment saved
    After the housing debacle a few years ago, it’s almost impossible to get a 0% down loan (a few options, such as VA, are much more expensive than conventional loans); most banks require at least 10%, but 20% is still the magic number!

    5. You are debt free
    And I mean all debt (including so-called good debt)!  Becoming debt free is a much higher priority to reaching financial peace then owning a home.  Once your income is freed from the burden of debt, you can maximize it’s wealth-building capabilities, including building equity in a home.

    6. You have a fully funded emergency fund
    When you own a home, you are liable for ALL maintenance and repairs!  No landlord to call at 4 am when the heater quits in February!  You need to have that 3-6 month reserve to cover whatever Murphy throws at you.  Also, what happens if you lose your job?  You’ll still need to pay the mortgage!

    Bonus:
    Now how do you determine how much house you can afford?  It’s a very simple calculation; no need to find an online calculator.  Don’t spend more than 25% of your after-tax pay on a 15 year, fixed rate mortgage.  Being house poor is no fun, better to have a modest home and money to spend, invest, and give.

    Double Bonus:
    When figuring out your payment, don’t forget to include property tax and homeowners insurance!  Depending on where you live, those can add $400-600 a month to your payment!

    Not ready to buy yet?  Lets develop a plan and get you ready, together!

  • Student Loans: A God-send or The Devil in Disguise?

    Student Loans: A God-send or The Devil in Disguise?

    A short time ago I read an article on FoxNews.com (click for that article) that got me thinking about student loans and the effect they have had on our nation (actually, I was a little angry after reading it).  Before I move into facts, figures, and suggestions, please let me rant a little.  If you don’t want to read my rant, click here to skip it.

    The article starts with a sad story (no sarcasm here) about a couple’s daughter that died at a young age about 4 years ago.  The parents co-signed their daughter’s $100k in private student loans for a nursing degree.  The parents lament that the debt, now around $200k, has devastated their financial standing with $2,000/month payments.  Yes, I agree that they are facing a very difficult situation caused by an even more difficult event, and I do sympathize with them.

    But the part of the article that caused the blood to start boiling was their blatant ‘passing of the buck’ of their responsibility that they signed up for and their failure as parents to prevent the debt in the first place (a new nurse can expect to earn about $42k/year; how do you repay $100k, raise a family, and enjoy life in that situation?!?).

    It’s extremely sad that these parents (who aren’t unique in this case) set up their daughter for failure by allowing her to go so far into debt when she was trying to start her life by co-signing the loans.  Parents have a responsibility to be parents, not friends, of their children and guide them towards success, not set them up for hardship and failure!

    The second thing that riled me up was that even though they knowingly signed as guarantor of the loan, they believe that they should be exempt from repaying the loan.  They took out private student loans, so the death forgiveness clause isn’t applicable, so as co-signer, they are required to repay the loans.  They are also upset that they can’t just walk away from their obligations by filing bankruptcy!  The father claims to be a minister, on top of it all!  I can’t imagine attending a church where the clergy don’t believe in personal responsibility.  He believes that private student loans should be regulated the same as Federal student loans.  Maybe he should have thought about that before signing his name?  Maybe he should have read the fine print?  Or maybe he should admit he made a big mistake and use this platform to warn others of the dangers?

    I think that there is a lesson to be learned here; while my heart goes out to this family for their pain, had the story ended differently, without tragedy, would this have been a happy ending?  Neither she nor her parents would have the freedom for her to choose her own path.  She would almost be forced to work, and work a lot, to make the payments, instead of having the option to work less, or not at all, to spend more time with her children.

    Ok, enough of that.  I needed to get that out, so thanks for indulging me.

    Talk to most students and their parents and they will tell you that “you can’t be a student without a student loan.”  Is that true?  Or just a popular excuse people use to justify a lack of planning and thought in school choice?

    I’m not going to bore you with facts and figures.  Instead, I’ll discuss a philosophy of college funding that gets almost no news coverage, is rarely recommended by ‘guidance’ counselors in schools, but is used by many people today (in fact, there is a book written on this subject that I HIGHLY recommend).

    What you may not be aware of is that many students actually pay for college as they go!  About 34% of college grads paid for their college without loans!  “How did they do it?” you might ask.  Each person is different, but you can point to a few things that made this possible for them:

    • Parents who planned ahead (college funds)
    • Scholarships (make it your job to apply for thousands of scholarships instead of [insert time waster here])
    • Work (many students spend almost 40hrs a week watching TV, playing video games, and doing other non-study activities)

    Lets look at college funds.  If you are a parent of a young child, start saving NOW!  Give your child the chance to pursue a higher education!  You can use a 529 or Coverdale Education Savings Account (ESA) to save with tax benefits (your friends and family can even contribute!).  If you have a child that you want to send to college, start saving now!

    Scholarships.  We all have heard of them, and heard that there is a lot of money out there up for grabs.  There is.  There are scholarships that are in the thousands, and others in the hundreds.  There are some specifically targeting certain groups, and others that are wider.  Chances are there are thousands of dollars of scholarships you can apply for.  Follow all the rules/requirements when applying and you have a better than average chance of being awarded some cash for college!  You might think that it’s not worth your time to apply, but consider this scenario: you spend a work-week (40 hrs) applying for a few hundred scholarships and are awarded a total of $2,000.  That’s $50/hr, equivalent to $100,000 a year!  You can’t make that much money at your part time job.  Spend time that you might otherwise spend playing video games, watching TV, or hanging out at the beach applying for scholarships and you could end up with a large chunk of your tuition paid for!

    Work.  It’s a four-letter word in the college context.  Many people think that if you work, your grades will suffer.  Many studies suggest that working a part time job (around 20-30 hrs a week) will actually help your grades!  Time management is one of the biggest skills learned while working in college, and it carries over into the workforce!  Since the average student spends only 15 hrs a week studying, 15-18 hrs in class, that leaves plenty of time to hold a job (working 8 hrs Fri, Sat & Sun = 24 hrs), even during the work week. [I worked 40 hrs a week for 4 years, graduated with a 3.4 GPA engineering degree, so it can be done!]  Working through the school year and working a lot in the summer can pay for an in-state degree!  Especially if the summer job is an internship in the student’s field!

    Maybe you are starting school this fall and your parent’s didn’t plan for your college and you don’t have any scholarship money coming, what can you do? I recommend paying as you go.  You may have to take a year or semester or two off in the process, but when you graduate debt free, you will not feel the pressure to take a less-than-ideal job offer just so you can pay your loan payments.  You can have the patience to pursue your calling!

    One more, very important, thing to consider when figuring out how to pay for college: college choice.  Unless you have a big, fat college fund, consider living at home and attending a local community college for the core classes then transferring to an in-state public school.  Is there any real benefit to crossing state lines?  Most likely not.  Pedigree schools (think IV League)?  There may be some very small benefit, but it rarely makes up for the extra you have to pay to attend!

    Parents, this is a bonus tip for you: remember that your 17 year old doesn’t have the experience, maturity, or common sense you have.  You are the parent, parent you children well and guide their college choice so that you are helping them, not hurting them, in the long run.

     

  • Cash is King! (Sorry Elvis)

    Cash is King! (Sorry Elvis)

    Today I was sitting at my desk pondering what subject I should write about next.  I have a list of subjects to choose from, but none of them were jumping out at me.  As any of you who are writers know, if you don’t feel something about what you are writing about, it comes out flat and lifeless.  It seems that when I write, how I feel about the subject flows into the words I write; its as if the keyboard is an extension of my thoughts and emotions.

    So I decided to browse some news sites to see what was going on and look for inspiration. If you are an artist or writer you know that sometimes you need some external inspiration to start the creative juices flowing. (I am actually both: I write this blog and express my artistic side with my camera; feel free to see my other side at JeremyFultonPhotography.com)  I came across an article that mentioned the future of credit cards and started my thoughts on the differences in spending habits when we use credit cards verses when we use physical cash.

    I used to use credit cards for EVERY purchase; I was doing my best to collect all those reward points my credit card company was offering me!  It seemed like a great idea: pay off the cards every month and get free gift cards every 3-6 months.  What I didn’t account for was that between the points and lack of feeling associated with plastic spending is that I was spending a lot more that I realized.  I can recall, now, several months where I had to dip into savings to cover the card balance.  But those points were so ‘wonderful’ I didn’t even think long term about my spending habits.

    It turns out I wasn’t alone.  It turns out that a lot of research has been done on spending habits over the years.  Carnegie Mellon actually conducted a study using an MRI machine to measure the pain centers of the brain when purchase decisions were made.  One conclusion of the study was that spending your own money (i.e. cash) activated the pain centers where delaying the payment (i.e. credit cards) did not.

    Spending with cash is painful!  Have you every noticed for yourself how you react emotionally when you are counting out actual greenbacks at the register?

    Even McDonalds knows that you will spend more if they take your plastic.  Remember back when you had to have cash at the drive through?  When McDonalds started taking credit cards, their average sale per transaction when up 40%!  Many businesses followed their example and now you can buy just about everything with credit!  They all know that we are less likely to worry about the cost of an item, and more about its features, status, and ‘quality.’

    In researching for this post I read many articles, interviews, and a couple of paper summaries; they all agree that we will spend more when using credit over using our own money (cash/debit) when making purchases of all sizes.

    “So,” you may be asking, “What do I do?”

    Cash.

    For your budget categories that you tend to be freer in your spending, cash is king!  My wife and I personally use cash for ‘blow money’, eating out, and groceries.  We use an old system called “the envelope system.”  We withdraw money from the ATM each pay period in the amount we budgeted for and put that cash into physical envelopes (you can get a modern system here).  When we go out to eat, we only use cash from that envelope; when it’s gone we eat in.  Same for groceries; when the envelope runs out it’s time for leftovers and goulash.

    It has really helped me reign in my spending habits, especial when going out to eat!  Back when I was on the “points system” I could easily spend over $400 a month on eating out!  Yet my retirement was hardly getting funded; how terrible is that?

    There are other benefits to using cash over other forms of payment beyond just keeping your spending in check.  When you pull out cash, it has immediacy; it tells someone you do have the money to spend.  The seller of a service/item knows that you are there and want to spend, and that you don’t need a credit check.  You can walk away. This gives you power. Power over price.

    Almost all prices are negotiable, to some extent (maybe not so much at Taco Bell), and that fact is more evident when you pull out a few Benjamins.  The vendor may give you a discount just for using cash (they pay 2-4% in fees to credit card companies).  You can also negotiate the actual price, esp. on large ticket items or dealing with individual sellers (like with Craigslist).  I know several people who have had success bargaining with cash, including a friend who paid half price for a hotel room just the other day!  This is a win-win deal for you; you are not going into debt to buy something, and spending less on the item/service!

    I’ll cover the myth that you need a credit card in a later post (I’ve traveled the US and visited Spain, France, Andorra, and Israel with my debit card).  So, what’s holding you back?  Why not try it for a month and see what happens?  You can always go back to using your credit card if I’m wrong!

    Let me know what experiences  you have had using cash in your life below:

  • Reverse Mortgages – Good retirement option or scam?

    Reverse Mortgages – Good retirement option or scam?

    We’ve all seen the commercials, the 60’s Heart Throb on TV touting how safe and great a reverse mortgage is for those in their elder years.  And for those who are older and were hurt in the “Great Recession” this may look like a great option to have a little extra money for travel, fixing up the house, or just to pay medical bills.  After all, why not use some of the equity in your home while you are still around to enjoy it?

    Sound too good to be true?   Or do your Spidey senses tingle when you see those commercials, but you’re not sure why?  Then read on!  But I’m not eligible for one, you say, but your parents and/or grand parents are!  Wouldn’t it feel good to be able to steer them in the right direction?  Good answer!

    In case you have not heard of a reverse mortgage, or not fully sure what it is, it’s basically a series of cash advances secured by your home, capped by the value of the home, that you don’t have to pay back until you vacate the home (either by moving out or dying).  To qualify for one you must be at least 62 years old and have enough equity in the home to cover the amount to be borrowed.

    You might be thinking that this is a great idea; borrow money and never have to pay it back!  You could use the money to travel, boost your life style, or do some home repairs/upgrades, right?  Sounds too good to be true, and you know what they say about that?

    Did you know:

    • That if the mortgage isn’t done correctly, a surviving spouse may have to pay back the loan or face foreclosure?
    • That the closing costs can be several thousand dollars?
    • That if you become delinquent on your insurance or property tax that the lender could call the loan (demand repayment immediately)?  (if you couldn’t pay your taxes, you for sure can’t pay the loan and WILL loose it)
    • That the housing market is not always an upward trend, and that if the value of your home falls the lender could stop payments that you started to rely on?
    • That if the home value drops (while your equity is dropping faster) and you want to move, you may not be able to afford to sell your home due to being upside-down on the loan?
    • The reverse mortgage industry is full of scam artists, so it’s possible your trusting grandma may fall for one.

    Still sound like a good plan?

    “But,” you say, “I’ll stay in this house till I die, so will my spouse, I’ve got a good pension that will more than cover taxes and insurance, and I’ll just use ‘my equity’ for fun stuff and not rely on it for meeting my needs.” That may be true and you and your spouse may never have to deal with any of the big negatives; but what about your heirs?  Did you want to leave them the family home?  They may be forced to sell it to pay back your debt when you paid on it for years and years hoping to leave a legacy.

    They may not all be scams, but they are for sure not a good option!  If you are having trouble making ends meet, please talk with me, or any other financial coach, before making what could be a very costly mistake.