Recently in Remember Category

Barbara

Send a comment to Barbara

Folks, we've made it through another graduation season. The gowns and mortar boards are packed away, and now many graduates are focused on their finances during the first months out of college. Student loan repayment is just down the road.

As you look ahead to that first student loan payment, you may be realizing that it's going to be a little tough to swing. You may have borrowed more than you can afford to repay or may not have secured employment quite yet. (Side note for those of you just starting to take out student loans: Make sure you budget properly so you don't borrow more than you can repay.)

Whatever your situation, there are options available to help make it easier to pay your student loan. Here are some ways you may be able to lower your interest rate or monthly payments:

• Choose a different repayment plan. For federal loans, there are a number of repayment plans other than the standard repayment plan. You may be able to have your payment based on your income, extend your repayment if you have over $25,000 in federal loans, or start out with smaller payments that gradually get larger over the repayment term. And check with your lender to see what repayment options are available for your private student loans.
• Take advantage of discounts from you lender. Ask your lender if there are any interest rate discounts available for your loan. For example, you may be able to save money if you have your monthly student loan payment automatically deducted from your checking or savings account.
• Consolidate your loans. By combining your federal student loans  together into a new loan with a longer repayment period, you'll usually lower your monthly payment. For private student loans you may even find that your interest rate is lower if your credit situation has improved or if you bring on a cosigner with excellent credit.

Remember that if you're lowering your monthly payment by extending your repayment period or paying just the interest, you may end up paying more interest over the life of your loan. However, in the grand scheme of things, if it prevents you from missing payments and defaulting on your student loan, it might be worth it.

Looking for a way to postpone your student loan payment? We'll talk about deferments and forbearances later this week, so stay tuned!

Meanwhile, hit me up with any questions you have about different repayment options.

Karen

Have you ever been in your favorite store with a cool new pair of jeans, a new t-shirt, and a slew of other clothes in hand, ready to pay when the cashier says, "If you open a store credit card account with us today you'll get 10% off your purchase?" At that moment you consider how great it would be to have a credit card at your favorite store — without having to pay for that $500 charge right away.

Before you decide to sign up for that store credit card, you might want to consider that typical annual percentage rates (APRs) on credit cards from a retail store are about 23%. Ouch!

If you are able to pay off your purchases right away, the percentage rate might not matter to you (just remember the possible effect on your credit). But, if you think that paying a little bit each month is more your style, you should see if the savings will be worth it. To do that, you'll need to know how your rate is calculated. 

Let's break down what a 10% savings at the register for a $500 purchase looks like in one month:

1. Figure your average daily balance.  Add balances each day (purchases minus payments) and divide that by the number of days in the billing period. We'll use 30 days for this example. Say you make no additional purchases or payments for the first 15 days, and then on day 16 you make a $50 payment and on day 21 you make a $75 purchase. So your balance was $500 days 1-15, $450 days 16-20, and $525 days 21-30.

Here's the math:
($500 x 15 days) + ($450 x 5 days) + ($525 x 10) = 15,000
15,000 divided by 30 days in the billing period = $500 average daily balance

2. Calculate the interest. After you have the average daily balance, you can find out how much interest you'll pay that first month. Take your APR divided by 12 to find out how much interest you're charged each month. Then take that number times your average daily balance.

   Here's the math:
   23% APR divided by 12 = Monthly rate of .019166
   .019166 x $500 = $9.58 interest charge

3. Was the savings worth it? Back to your original sale: You saved $50 at the register (10% of $500), but after a month on your store credit card, you owe $9.58 on the balance. That lowers your savings to $40 after the first month. And unless you pay off the remaining balance, those savings will continue to drop.

While I am an advocate of using credit when it makes sense, I'm highly in favor of knowing what my rates are and what it will cost me in the long run. It's easier to make better choices when you know exactly what that retail therapy  will cost.

Barbara

Since I just talked about ways for wedding party attendants to budget, I thought it would be prudent to speak to all those brides- and grooms-to-be out there as well.

Now, I'm just a novice in the wedding planning arena, but I'm getting plenty of exposure from my sister, who's planning an October wedding. It seems like every time we're in the same room there is something new to look at. From centerpieces to cake, "save the date" cards to invitations...I've seen many options.

My sister is staying true to the "bride on a budget" mentality. She and many of the other brides in my life these days are looking for ways to lower their wedding's bottom line. Not everyone has the means to celebrate with a Platinum Wedding , and in my opinion, no couple should start their marriage with a mound of wedding debt in order to have one.

Through online sources like The Knot , brides can get great tips on everything from negotiating with vendors  to little ways to save.  Just cutting back on a few things or choosing to do something yourself can make a huge difference.

So far in my tenure as bridesmaid I've seen homemade cakes, bouquets made by the bridal party, and wedding dance music courtesy of the bride's iPod.  I even designed one of my friend's invitations so she could save on costs.

For all you young married ones out there, did you pull off a budget wedding? If anyone has some good tips, please pass 'em on — my sister will be eternally grateful!

Barbara

It's the year of the wedding — for me at least. This year I'll be a maid of honor twice and bridesmaid once. (Yes, it's a bit Jane. ) Not to mention I'll be a guest at a slew of other marriage celebrations.

As I've said before, I love a good wedding. But this year the matrimonial festivities are taking their toll on my pocketbook. Are any of you in the same boat?

When you're fresh out of college, it can be difficult to find the money you need for the basics (like rent, utilities and your student loan payment), let alone adding in a budget category for dresses, tux rentals and gifts. It can be a bit overwhelming. At first I was definitely wondering how to survive. 

However, with a little creativity on my part and some thoughtfulness on the part of some brides (thanks to a recession-friendlier industry ), I've been able to lessen the overall costs. Here are some slices of buttercream-frosted savings cake for thought:

1. Showers and parties — When you're in the wedding party, chances are you'll be hosting or helping with a shower or bachelorette/bachelor party. These, my friends, can get extreme. Think food, favors, game prizes, transportation...it all adds up. But thinking outside the box (a backyard BBQ, do-it-yourself invitations, etc.) can help you save. I was able to put together some cute favors for an upcoming shower with some items I found on sale. And instead of renting a bus for a bachelorette party, we're heading to places within walking distance of each other in Omaha's Old Market. 
2. Gifts — Here is where being creative can not only be cheaper, but more memorable, too. Staci once told me that while she was on a strict budget working in Washington, D.C., she gave couples an American flag that had been flown over the U.S. Capitol  on their wedding day. She also gave me a great idea for what has become my standard wedding gift: a basket of blessings based on a quote from the movie "It's a Wonderful Life."  Here's how it breaks down:
• Bread... that this house may never know hunger (a gift certificate to Panera Bread®  or your local bakery)
• Salt ... that life may always have flavor (coarse salt in a cute shaker)
• And wine ... that joy and prosperity may reign forever (this one's pretty self-explanatory)
3. Attire — Thanks to budget-conscious brides, I've had some savings here as well! My first wedding duty this year is as maid of honor for my best friend, who kindly chose a bridesmaid's dress by Isaac Mizrahi for Target®  (just $49.99!). Plus, we got to pick our own shoes; I made sure they were something I would wear to work, too. The other weddings I'm in? I'm getting a pretty slick deal there, too. One bride's mother purchased the bridesmaids' dresses (how nice is that?) and the other got a discount for choosing dresses at the same store where she purchased her wedding gown (bonus!).

So despite my initial thoughts, I think I am actually going to make it through this year of wedded bliss and may even still want to have a wedding of my own one day!

Anyone else have other tips to save on wedding party expenses?

Kathy

Increasingly, more and more of us are moving a part of our social lives online. Take me for example: I'm a social media  junkie! I love reconnecting with old friends with whom I had lost touch, sharing pictures from recent trips or parties, hearing about my friends' opinions on current events, etc., etc., etc...

Is there a support group for folks like me?

Which leads me to a few important questions: Does your virtual reputation reflect your professional reputation (or the one you want to establish)? Are the photos and comments you're posting online things you would want your parents to know about? What about your boss or any future employer?

If the answer is no, you might want to take some steps to make sure that your reputation is protected (or at least consistent) online! Here's what I do:

1. I deactivated accounts that I no longer use. Like I said, I jumped on the social media bandwagon in a big way. At my worst, I had joined no fewer than eight different social media-type sites. Yikes! About a year ago, I went back and removed my information from all but the two or three sites that I actively use so that I don't have such a long trail of websites to keep tabs on.
2. I actively manage the privacy settings  provided on the sites I still do use. I make sure that I am only sharing personal information with my friends and I restrict access to photos even more stringently. If someone tags a picture of me that I would prefer didn't go up, I immediately remove that tag and occasionally even ask that person to take pictures down. People have gotten fired for photos that were put up on these web sites! Is that something I want to deal with? Um, no!

There are companies out there  that will help you protect your rep, but in the spirit of DIY, this is something that you should take a very personal interest in yourself! If you're not quite sure about general guidelines for internet privacy, there are plenty of resources to help you get educated, such as:

1. www.ConnectSafely.org 
2. www.NetSmartz.org 
3. www.OnguardOnline.gov 
4. www.TRUSTe.org 
5. www.WebWiseKids.org 
6. www.WiredSafety.org 

What steps have you taken to protect your virtual rep?

Staci

I'm always looking for ways to make my life a little more convenient and a little less messy. In fact, if anyone has some simple advice for: [1] stopping my Corgi  from shedding uncontrollably, and [2] keeping dog hair from accumulating on my new bamboo floors , I'm listening.

But today I'm offering a suggestion to make your lives a little more convenient and a little less messy while also doing something great for the environment: switching to online-only statements.

With Earth Day  happening this week, it's a great time to consider going paperless. Plus, until May 31 Wells Fargo is offering a really cool sweepstakes as an incentive. By switching your eligible personal and/or business accounts to online-only statements (student loans included), you'll automatically be entered for a chance to win one of three $10,000 prizes. Each account you switch qualifies you for an entry. Plus, Wells Fargo will donate $10,000 in your name to your choice of one of the following three environmental nonprofits: The Nature Conservancy, Earthwatch® Institute, or The Trust for Public Land.

There's no purchase necessary. Check out the official Sweepstakes Rules for all the legalese.

Since I'm a Wells Fargo team member who already receives all of her statements online, the only "spring sweep" I'm eligible for pertains to the dog hair on my bamboo floors. But if you're eligible, enroll today and help save the greater Green!

Barbara

We all strive to be above average in some of the things we do. Scholars are hoping to surpass the average grades, athletes are striving for higher than average statistics, you get the picture.

Yet we tend to settle on being average in other arenas. And, yes, sometimes it's just fine to run with the pack as just your average Joe or Jane.  But there is one area that you should never find comfort in being average — your finances.

Why not? I can tell you from personal experience that finding comfort in being average can come back to bite you!

When I graduated from college, a little over $2,000 on a college credit card followed me into the real world. Now for someone who had a scholarship to cover college expenses that seems a bit high, right?

Well, here's the deal. Looking into some credit card facts  I kept hearing over and over that the average college student graduates with over $2,000 in credit card debt. So I thought, "What the heck?" If my counterparts are dealing with the same situation, I can charge a few things, too.

However, when we get stuck thinking that the debt is inevitable, we become less conscious of how much we are spending on things we don't really need. Part of that $2,000 on my credit card was for an iPod, and be sure that I whipped out the plastic for a pair of shoes or two (or three...).

So in the end, thinking average college debt was OK helped me develop some pretty bad spending habits. And unfortunately, those habits stuck with me until I started working for a bank and talking about financial education!

I challenge you to be better than average when it comes to your finances — both during college and after. Think twice about charging that sweatshirt at the campus bookstore. Resist ordering a pizza for dinner when you could use your pre-paid meal plan at the campus cafeteria.

Don't fall into the average trap with your student loans, either (the average for student loan debt is almost $20,000 ). Consider a part-time job to supplement your living expenses rather than taking out more student loans. Pay your interest during school to avoid capitalization.

Each tiny step will put you leaps and bounds in front of the students who settle for "average."

Rachel

A few years ago when I was a banker, a high school student came in looking for help. He was freaking out because he had overdrawn  his account again and his dad was going to take away his car. "You have to help me!" he pleaded.

Oh, to be in high school again and have the threat of your car being taken away. People, listen: Of all things to have your car taken away for, banking trouble should not be one of them. You got this. Here's what you can do.

1. Make sure you have overdraft protection set up. When you spend more than you have in your account and you have overdraft protection set up, money can be automatically transferred from your savings account or credit card to your checking account to cover whatever you bought. This transfer costs money but it's less than a full overdraft charge. But don't let it come to this. You still have to replenish your savings or pay off that charge to your credit card after the fact. Do what you can to prevent this from happening altogether.


2. Play a little money mind game with yourself. For most of us, if there is money in the account, we're going to spend it, right? And if you only have $5 left in your account until Friday and you really want that Red Bull , you are going to justify the purchase. Here's what I used to do: When I opened my checking account with $100, I considered my account at zero. I pretended that $100 = $0. That way I always had an emergency cushion. When I say pretended, I mean it. That $100 in my checking account was invisible to me. Very rarely did I let myself go below the $100 and when I did, it was usually for something "really important: the day before payday.


3. Set up a text message alert to send when you enter the danger zone. You can get a text you when your account gets down to a certain amount, whatever you designate.


4. When in doubt, send a text to check your balance. This way there is no guessing or assuming and you know exactly where you stand.


5. And of course, be sure you are logging in to online banking as often as you do Facebook.  Knowing what's up will help you stay out of trouble, at least with your bank account.

Staci

Here at the Student LoanDown, we like to think that every month is financial literacy month. But this April, it actually is National Financial Literacy Month!  Time to brush up on your financial fundamentals!

One of the personal finance bloggers we follow regularly, J.D. from Get Rich Slowly, asked his readers what they want to learn during Financial Literacy Month.  They've been more than forthcoming with interesting suggestions — some even want to know more about student loans.

You've been asking some interesting questions lately, too. In case you've missed them, I thought I'd highlight some of our recent exchanges:

• Do you have questions about student loan default or federal student loan rehabilitation? Check out the comment string on my post about student loan repayment.
• Are you thinking about cosigning a private student loan for a student and wondering how long you'll be on the hook?
• Want to know more about how Wells Fargo's private student loan interest rates are calculated? Barbara answers Tyler's questions here.
• If you're curious about student loan consolidation, our most popular post probably addresses the topic somewhere in the comments section!

What haven't we discussed that you'd like to know? You don't have to wait for Financial Literacy Month to roll around — you can ask us anytime.

Barbara

We all make mistakes, right? And whether your financial mistakes are minor (going $3.00 over budget for that fancy coffee) or major (defaulting on your student loans ), you must learn from your mistakes and you must take steps to correct those mistakes and lessen their impact.

So, let's talk about the sticky situations some of you may be in and how you can take action to fix your credit. I'll also throw in a couple that would be good for readers who have decent credit but would like to improve their situation.

Just like with building your credit, the first thing to do when fixing negative credit is looking at your credit report and credit score. Once you have a good picture of where you stand, you'll know what issues you need to address first.

• Get your accounts current. If there is any credit you've let slip past due, you need to get back on schedule. This goes for your utilities in addition to loans and lines of credit.
• Correct any credit report discrepancies. Check out what you should focus on fixing in #6 and #7 of this MSN Money article. 
• Work with your lender. Sometimes lenders are willing to work with you to establish a payment plan to bring your debts out of delinquency. It's in your best interest to develop a plan with your lender rather than have them send your debts to a collection agency.
• Pay down your credit card debt. Because part of your credit score is based on how much of your credit limit you're using, it's best to keep the percentage of debt relatively low to the available credit. And remember the caveat I mentioned in my last post: the amount reported is based on your statement, so try to pay what you can off before the statement is generated.
• Don't lower your limits or close accounts. By lowering credit limits or closing accounts, you could hurt your credit because you'll have less available credit and therefore a higher debt-to-credit limit ratio. Plus, it may jeopardize your length of credit. Usually, you should keep the first credit account you established open to show a longer credit history.
• Try to avoid frequent moves and job jumping. By staying in the same home or job, you're showing stability. Of course, you shouldn't stay in a job or location that isn't working for you, but some lenders like to see constancy in those two arenas.
• Pay on time. Even just one late payment can be devastating to your credit score. You can set up automatic payments or use online bill pay to help keep you on track.

Well, folks, that wraps up our two-week credit series. What other credit questions can we help you with?