Buying a Rental Property for Cash Flow

The following post is by MPFJ staff writer, Jeff. Jeff has been writing online about finance related issues since 2009, and after a lot of soul searching in 2015 has crystallized his goal of financial independence and blogs about his journey to freedom at zerotofi.co

Recently after a few life changes, I started making changes to my investment strategy. I have gone head first into the rental property market, and have closed on my first 4 unit building. I was able to learn a ton during this process, and would like to show you how to properly analyze a rental property to make sure that you don’t end up losing your shirt. Some people think it’s just as easy as collecting rent and paying the mortgage (not likely) and some think its going to be awful with maintenance issues and other problems left, right and center and you’ll lose your shirt (also, possible, but not highly likely). When looking into a rental property, here are a few things you need to account for to determine cash flow.

Lets assume you have a rental property that is a single family house, renting for 1,500 per month. Here is how you should analyze to make sure you’re not going to get caught with your pants down.

Vacancy Reserves

The unit isn’t going to have people in it the day after the prior group moved out, is it? Most likely not. It may take a few weeks or a month or 2 to fill it. You’ll need to make sure you have reserves for this. Many investors use 7-10% of the rental price. Since I like easy math, we will use 10%, for a final number of 150/mo for vacancies.

Capital Expenses Reserves

Shortened to CapEx frequently, this is a reserve set aside for big ticket replacements. A new fence, a new roof, new furnace, new water heater, etc. 7-10% of the rental price is common here as well. Since we like our math easy, we will use 10%, for 150/mo.

Property Management

You may self manage because you live at the place early on, but will that always be the case? You’ll want to build in for property management as well, when your life changes. 10% (again) is common here, $150.

Since this is a single family home, the tenants will take care of the water, sewer, and electric and gas bills. Any other things (such as upkeep, snow shoveling, etc) can either be done by the tenants or the property manager.

If you’re just looking to get started with rental real estate, don’t just think that if you earn more in rent than the mortgage, taxes and interest (Sometimes abbreviated as PITI) that you’ve got a good investment. The first blown furnace you’ve got will cause you major problems and really hamper whatever cashflow you may have.

How about you all? Are you interested or are you currently investing in real estate?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/blapp/5802137177/

4 Factors to Consider When Buying a Central Air Conditioning Unit

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.

When we bought our house two years ago, we knew that the air conditioner was as old as the house, 17 years, and would need to be replaced in the near future.  Just a few weeks ago, our air conditioner started making a terrible ruckus and then stopped working all together.  Did I mention that we live in Arizona, and the temperature was 111 degrees that day?

It took four days and more money than I like to part with to get a new air conditioner.  Thanks to our own research and consulting with several air conditioning companies, we took a crash course on choosing the right air conditioner for our house and budget.  Here’s what we learned:

There Is a Limit to SEER Savings

How efficient an air conditioner unit is judged to be is measured in SEER, which stands for Seasonal Energy Efficiency Ratio.  Air conditioners on the market today typically range from 14 to 24 SEER.  Our 19 year old air conditioner that was original to the house had a 10 SEER, which isn’t even available on the market anymore because every new air conditioner is much more efficient now.

The higher the SEER rating, the higher the price you pay initially for the unit.  However, after a certain point, the models are so efficient that you don’t recoup the savings for the initial price of the unit in energy saved.  Rarely will buying the highest SEER save you the most money; you have to find the perfect point for your budget and your climate.

In the end, we chose to go with a 16 SEER unit.  That seemed to be our perfect point between money paid upfront and recouped costs in energy efficiency over the life of the unit, as it is for many people.  “According to Ed Purvis, vice president of the heating, ventilation, and air conditioning company Emerson Climate Technologies, a unit with a SEER rating of 16 or more could save you about $415 a year (compared with an older, low-efficiency model)” (US News).

Your air conditioner sales person should have a chart to show you initial cost of the unit versus savings over the years based on SEER rating, but if you want to do research first yourself, this SEER calculator is fun to play with and very informative.

Choose the Right Tonnage

Air conditioner units are measured in tonnage, i.e., 3-ton, 4-ton, 5-ton, etc.  The tonnage does not refer to the unit’s weight but rather it is “a measure of an air conditioner’s ability to cool.  One ton is the ability of your air conditioner to cool 12,000 BTUs (British Thermal Unit) in an hour.  Likewise, a “2-ton central air conditioner is able to cool 24,000 BTUs per hour” (asm-air).  BTU “is the amount of energy required to heat or cool one pound of water by one degree Fahrenheit.  So a 1-ton air conditioner can cool 12,000 pounds of water by one degree every hour” (asm-air).

What size unit you need depends on many factors: where you live geographically in the country, the square footage of your home, and the type of air conditioner that you’re installing, just to name a few factors.

Getting the right tonnage is important.  If you choose an air conditioner that has too much tonnage for your home, you will likely suffer with an air conditioner that quickly cools your home but then turns off, allowing the temperature inside to rise again.  This air conditioner will turn off and on all day long, which will not be good for your electric bill.

If the tonnage is too small, the air conditioner will likely run constantly trying to cool your home, which is also not good for your electric bill.

Our old air conditioner was 5-ton.  When we got a quote from one company, they also suggested a new 5-ton air conditioner.  However, the company that we ultimately went with measured how much insulation our home has and also plugged into a computer the layout of our home, where the evening sun hits and the square footage to determine that we actually only needed a 3-ton unit, which we went with.

This chart, which gives a rough gauge of the tonnage you will need based on the geographical location of your home and the square footage, also placed our needs as 3-ton.

Consider a Variable Speed Fan

There are two types of air conditioners—standard and variable speed.  The standard air conditioner is the one that many of us are familiar with.  When it turns on, cool air comes out full blast, and when it turns off, nothing comes out.  Throughout the day, the air conditioner cycles on and off as the temperature in your house rises and cools.

An air conditioner with a variable speed fan, by contrast, comes on full force when the temperature rises, but then, when the temperature cools to the desired level, the fan turns down to a lower setting and continues to circulate air through your duct work and your home.  This type of air conditioner “saves energy by operating at lower speeds, but energy savings also results from avoiding repeated stops and starts, a process that requires a large amount of electricity” (Angie’s List).

The Bottom Line Isn’t Everything

Buying a brand new air conditioner unit can certainly cause sticker shock.  For many, the tendency maybe to go with the least initial damage and purchase the air conditioner that is the cheapest with a single fan and a lower SEER rating.  However, remember that central air conditioning units usually last 10 to 20 years, so that gives you plenty of time to recoup your initial cost in lifetime energy savings.

Consider that “air conditioners with a variable speed handler generally cost about 30 percent more than standard units, according to Chris Cunningham, owner of Service Plus Heating Cooling Plumbing in Fishers, Indiana.  But he calls the added expense a worthwhile investment because of the energy savings, the lessened wear and tear on the system, and especially the comfort increase.  ‘It runs longer with lower output, gets out the humidity and balances the house’s environment,’ he says. ‘That’s worth every bit of the additional third of the cost’” (Angie’s List).

When deciding between air conditioning companies, make sure to check online reviews from a variety of sources.  In addition, consider what other perks come with the install.  For instance, the company that we went with will send a service technician out for free twice a year to service our unit for the next two years.  In the spring, they’ll service the air conditioning unit, and in the fall, they’ll service the heater.  In addition, the air conditioner comes with a 10 year warranty on parts and labor, so that will save us in the years to come.

In the end, we decided to go with a 3-ton, 16 SEER air conditioner with a variable speed fan.  Our old unit had NOT been energy efficient.  Thanks to this new unit, we’re looking to see significant savings on our electric bill.  Considering that we live in Arizona and often run an air conditioner eight months of the year, energy efficiency was as important to us as the initial cost.  (I’m not going to lie, though, paying for the unit upfront was painful!)

How about you all? Have you recently replaced a central air conditioner unit, or are you planning to in the near future?  If so, what other factors are you considering?

Share your experiences by commenting below!

***Photo courtesy http://www.idpinthat.com/edit/445

Are Conferences Really Worth the Price?

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

Attending a conference is a great way to network and connect with others, learn new skills and strategies, and gain tons of inspiration. There are probably thousands of conferences dedicated to each specific industry that occur all over the country each year.

Whether you are an entrepreneur, retail manager, gamer, or finance enthusiast, odds are there’s a conference out there for you.

Conferences are often referred to as in investment due to how expensive they can be. Most conferences are between 2-5 days and tickets can range anywhere from $250-$1000+. The average conference attendee who is paying out of pocket can expect to spend at least $1000 for the entire experience in most cases when you consider the cost of your ticket, travel, your hotel stay, food and extra non-including activities and so on.

Now you may be wondering, who can afford to spend that much money on a conference?

Americans spend that type of money on vacations, dining out annually, clothes, etc. very easily. Investing that money in an educational conference instead might be a better way to spend your money, only if you see the return on your investment.

Here are a few ways to determine whether or not a conference is really worth the price.

Determine How Valuable the Education Is

Will you be receiving an education worth $1000+ by attending a particular conference? I know this is hard to determine if you’ve never attended the conference. However, you can do some research by reading reviews from past attendees and checking out the main conference website to look at the agenda for each day.

If you are considering attending a conference in the first place, you must have a main goal in mind that you would like to achieve as a result of the experience. Look at the titles of the sessions along with the bio for each presenter to see if you are interested in the presentation topics and if you will take anything away from it. What skills and strategies do you hope to learn and will they help you save time and money? What issues are you having that could possibly be solved during one of the sessions?

It’s best to organize your schedule before heading to a conference and map out which events and presentations you will attend. You should even write out a series of questions.

What Kind of Networking Opportunities Does the Conference Provide?

Networking opportunities are a given at conferences. When you put a ton of people who have similar interests in the same area together for a few days, there are bound to be active conversations in the hallway, during breakfast, and in between sessions to say the least.

You will definitely meet new people and receive tons of business cards for follow ups which are good things if you’re looking to expand your network.

If the conference you are considering attending offers additional, more specific network opportunities, that is an added bonus. For example, last year I attended FinCon which is an annual financial bloggers’ conference. It’s not just for financial bloggers, though. Podcasters, financial advisors, fin-tech businesses and other companies also attend.

What I loved about FinCon last year was the private networking session they have for freelance writers who were actively looking for work. Before the conference, personal writers had a chance to reach out to blogs and websites that were hiring to set up a time to talk during the conference.

There were also opportunities for people who didn’t set up formal meetings to walk around the room and introduce themselves to potential clients. This event was right up my alley since I was looking for additional clients and I gained a ton of leads that day as this event.

Priceless networking opportunities like these are so worth it.

What Types of Sponsors of Brands Will be There?

Conferences have several sponsors and a lot of them may try to sell you something or get you to sign up for something at the conference. However, some brands and sponsors may also be looking for partnerships as well.

If you own a blog, website, or business, attending a conference can put you face-to-face with popular national brands so you can connect with them on a personal level and secure some new opportunities for yourself.

During FinCon last year, I got the chance to sit down with the team at Credit Karma and share my money story on camera. Months later, they reached out to me with an interest in getting permission to use my story either on their site or for their training materials. When I agreed, they sent me a $500 gift card for compensation – more than the price of my conference ticket itself.

Will There Be Any Freebies or Additional Features and Perks Included?

If the owner or company that is hosting the conference has some additional freebies and offers in store for you, that is always a good thing. Some conferences offer a discount on your hotel room rate, free swag from sponsors, free or discounted entry to events that occur outside the normal conference schedule, a few meals throughout the day and so on.

If a conference doesn’t offer any of these things, you don’t have to write the opportunity off completely, but be cautious of conferences where you are expected to pay for every little thing out of pocket. Freebies and perks can go a long way in terms of lowering your costs and making a conference worth it in terms of your budget in ROI.

Additional Ways to Lower the Cost of a Conference

Speaking of lowering the costs of attending a conference, here are some additional things you can do to make sure you are getting the most out of the experience and not going too overboard on your budget.

Attend a conference in a nearby city first – This may be a good option if you are on the fence about paying for an entire conference experience. Back when I was trying to become a professional resume writer, the National Resume Writer’s Association was hosting their annual conference in Chicago which was only about 45 minutes away from me. I practically couldn’t resist attending because I didn’t have to worry about booking a flight or staying in a pricey hotel since I could stay with my sister who lived in Chicago for the duration of the event.

Order Your Ticket Early – Most conferences have early-bird rates that are extremely discounted so if you know you want to attend a conference, you can probably purchase your ticket for cheap at least a year out in advance.

Consider a Roommate – Even if the conference organizer negotiates a lower hotel room rate for attendees, staying in a nice hotel can still be pretty expensive. For FinCon I got a roommate and it cut the price of the hotel room for 4 days from $650 to only about $325 plus tax. Ask the organizers of the conference if they have any groups for attendees to communicate before the event and secure a roommate.

Cash in Credit Card Rewards for Your Flight – If you have credit card rewards or cash back, attending a conference would be a great time to cash those rewards in to save money on your flight.

All in all, you must keep all these factors in mind and weigh the benefits in comparison to the costs of the entire experience to determine whether it will be worthwhile for you.

How about you all? Have you ever attended a conference? Do you think conferences are worth the price?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/dionhinchcliffe/3020387867/

Why Universal Life Insurance Premiums Are Rapidly Rising

The following is a post by MPFJ staff writer, Toi Williams, who is a professional personal finance blogger of American Consumer News. She has backgrounds in personal finance, sales, and real estate.

Many people holding universal life insurance policies received an unpleasant surprise this year, as the premiums for many of these policies skyrocketed. Some consumers who purchased their policies decades ago saw their premiums increase by 20 – 40 percent, leaving them with few options other than to pay the higher cost or let their insurance policy lapse. Policyholders are understandably frustrated, with some taking to the courts to try to halt or limit the premium increases.

So why are the premiums for universal life insurance policies rising so quickly?

The main reason for the dramatic premium increases is the long-running, low-interest rate environment. Low interest rates lower the income insurers make from high-grade corporate bonds and U.S. Treasuries, which insurers hold to maturity. This income pays for most of the cost of insurance. As life insurers’ assumptions about interest rates are falling short of economic reality, it becomes harder for them to pay the benefits for the policies. Insurers have few options to deal with the shortfall other than hiking the amount the policyholder pays into their policies via premiums.

Universal life insurance policies are already more expensive than term life insurance policies because they typically last for the policyholder’s life, guaranteeing a death benefit regardless of when the policyholder dies. These types of insurance policies also have a savings component that accrues value over time, making them attractive for use in saving for retirement. The policies were widely popular in the 1980s and 1990s, when interest rates were higher. In the early 1980s, when interest rates rose to about 15 percent, universal life insurance policies accounted for a quarter of all life insurance sold to individuals.

Premiums for universal life insurance policies are based on multiple factors, including interest, mortality, taxes and expenses associated with the policy. Because of the numerous variables that go into calculating the premium price, the premiums can vary over the life of the policy. Many of the customers affected by the latest rate hikes say that their monthly payments on the policies rose before, but always in relatively small increments.

Some universal life insurance policyholders who bought their policies from the Transamerica Life Insurance Company were notified last year that their rates would increase by an estimated 38 percent. Other companies, including the AXA Equitable Life Insurance Company and Voya Financial, have also been notifying customers of large rate increases for universal life policies. The National Association of Insurance Commissioners is now examining whether the increases were justified.

What options do holders of these universal life policies have?

Universal life insurance policyholders are left with few options to cope with the premium increases. If policyholders don’t pay the higher rate imposed by their insurer, the higher deduction amount will eventually deplete the policy’s cash value account, and the policy will lapse. For policy holders that are near retirement, finding affordable replacement policies would be difficult now because they are much older.

Holders of universal life insurance policies could reduce the death benefit of their policy, increasing their period of coverage in return for less of a payout. Policyholders also have the option to surrender the policies and take whatever cash value remains. However, taxes would probably be owed on the cash, reducing the amount the policyholder receives even further. Roughly a decade of low-interest rates has already made it hard for savers trying to preserve their nest eggs in low-risk fixed-income investments.

In theory, premiums could drop if a sharp and sustained increase in interest rates occurs. However, there is no indication from the Federal Reserve, which sets benchmark interest rates, that rates will be rising anytime soon. The agency raised interest rates by a modest amount last December after nearly a decade of historic lows, with further rate increases expected throughout 2016. Subsequent economic headwinds have delayed those plans for the foreseeable future.

Breaking down the Transamerica lawsuit

Angry consumers have filed a lawsuit against Transamerica over the premium increases imposed on their policies. The lawsuit, which is seeking class action status, accuses Transamerica of trying to “impermissibly shift to the policyholders its own, independent obligation to make good on the interest rate guarantees in the policies.” Plaintiffs allege that the premium hikes constitute a breach of obligations under the policies and have led to damages against contract holders.

The cost increases by Transamerica began in August 2015 on universal life insurance contracts sold in the late 1980s and early 1990s. Most of these policies guaranteed an interest rate of no less than 5.5 percent annually. The complaint says that Transamerica raised monthly charges by as much as 38 percent “to subsidize its cost of meeting its interest guarantee, to recoup past losses on the policies and on its investment portfolio, and to make the policies more profitable by inducing policy terminations by those policyholders who could not afford the increase.”

The lawsuit, filed in Los Angeles, alleges that Transamerica breached its contract and acted in bad faith. It notes that the insurer is raising its rates as the time nears when policyholders will begin collecting on the policies. Harvey Rosenfield, founder of Consumer Watchdog and one of the lawyers working on the case, said in a statement, “After taking their premiums for many years, Transamerica is attempting to dump its elderly and retired policyholders at a time in their lives when they are counting on the policies.”

A Transamerica spokesman says that the increases were permissible under the policies and that no policyholders are being charged more than the maximum rates specified in their policies. Another said the firm has communicated with policyholders about expected changes based on what it forecasts future costs to provide coverage will be. Further rate increases can be expected in the future if interest rates remain low.

How about you all? Are you familiar with or have any experience with universal life insurance or know someone involved with the Transamerica lawsuit?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/68751915@N05/6551520247/

3 Ways for Parents of Current (or Future) College Students to Save Money For Their Education

These days, a college education is not exactly cheap.  In fact, it’s more expensive than ever to attend a university in the United States.

While this is rather daunting, there are ways that parents of current (or future) college students can save money to help finance their education.  Here are just three examples:

 

• Have your student apply for scholarships:

There are a lot of different scholarship opportunities out there, and often times the ones closest to home are overlooked.  While there are larger national-level scholarships available, there are often scholarships available locally for students to apply for in order to help finance their college education.  These local scholarships are also often less competitive than larger regional or national scholarships, so your odds of getting one are greater.

• Optimize your student’s meal plan:

When it comes to paying for your student’s meals on campus, make sure you’re not pouring money down the drain by having the wrong meal plan.  If you find you are ending up with a lot of extra meals at the end of the term, you should consider changing to a plan with fewer meals (and likely a cheaper price tag!).

On the other hand, if your student doesn’t currently have a meal plan, or he or she has a plan that doesn’t include enough meals to last the whole term and they’re spending more on groceries or take-out than they would if they had a larger meal plan, scale up.  Take a closer look at their budget (or what you’ve set for them) and if you find they are spending more money on outside meals than they would if they went for a larger meal plan, then consider upgrading to a meal plan that includes more meals per term.

• Use a cash-back credit card:

While you need to be careful that you keep your spending in check and not let it get out of control, when you do use a credit card you should make sure you use one that offers cash-back.

For example, the Upromise MasterCard® is a great example of such a card, allowing you to save money or directly help pay off your child’s student loans while you spend. With over 850 participating online stores, over 10,000 restaurants, and several major travel sites, you can get up to 10% cash back on your purchases through Upromise.com simply by using the Upromise MasterCard. There are a lot of necessary items that you’ll need to purchase for your student, and with hundreds of online retailers participating, there’s no reason not to get cash back on what you spend. Similarly, if your student lives far, you’ll want him or her to travel and visit during school breaks, and with several major travel sites participating, you can get cash back when you book your travel plans using the Upromise MasterCard. Further, you can get up to 2% cash back at certain department stores and movie theaters. Finally, you can get up to 1% cash back on any other purchase you make, therefore no matter what you spend your money on, you’ll be able to get a little bit back each time to help you finance your child’s college education. If you’re interested in learning more about the Upromise MasterCard, take a look at the infographic at the link below!

10 Smart but Frugal Wedding Gift Ideas

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

With wedding season in full swing, some might be a bit overwhelmed with working extra money into their budget for wedding gift expenses. Wedding gift shopping is of a whole different genre; you want to give a gift that the newlyweds will cherish forever. So, how to make that special gift mesh with a frugal budget? Here are ten ideas for frugal wedding gifts that come from the heart and will bring joy and remembrance to the wedded couple for years to come.

Personalized Cookbook

Purchase a blank cookbook and fill it with hand-written versions of your (or their) favorite recipes (if you don’t have great handwriting, print out the recipes and glue them to the book page). You can also use some pages to put photos on or to share memories you have about the couple’s pre-wedding years. Remember to leave at least half of the pages blank so that the newlyweds can add their own favorite recipes.

Themed Gift Basket

Themed gift baskets can cover so many different genres and are a joy both to give and to receive. Here are some basket ideas:

A cleaning supply basket containing:

• A brightly colored cleaning bucket
• Staple cleaning supplies such as window cleaner, toilet bowl cleaner, dish soap, hand soap, etc
• Sponges, paper towels and/or cleaning rags

A dinner basket containing:

• A box of pasta
• Your favorite sauce
• Non-refrigerated garlic or other bread
• Croutons (for a salad)
• An inexpensive bottle of wine
• Inexpensive wine glasses

A bonfire basket containing:

• Hershey’s chocolate bars
• Marshmallows
• Graham crackers
• A cozy blanket

A picnic basket containing:

• A picnic basket
• Plates, silverware and napkins for two
• A cozy blanket
• An inexpensive bottle of wine
• Wine glasses

There are a host of other gift basket ideas you can use too; just check online at sites such as Pinterest for more ideas. Wrap the baskets in clear cellophane and use a bow to add extra sparkle to the gift.

Framed Wedding Photo or Wedding Invitation

Purchase a nice but inexpensive wedding frame and use it to frame their wedding invitation or a great casual photo you have of the couple, either from their wedding reception or from another event.

Personalized Stationery

Hook the newlyweds up with a package of personalized stationery designed to fit their personalities, and add a nice but inexpensive pen/pencil set if it’s in the budget. Online sites such as Vistaprint have a host of different types of personalized stationery at affordable prices.

First Anniversary Bottle of Wine

Go to the wine store and find a nice, specialized bottle of wine – maybe something locally produced – and place it in a basket with a nice hand towel, some inexpensive wine glasses, a corkscrew and a note saying that the basket is for the celebration of their first anniversary. Wrap the basket in cellophane and a bow to keep it looking nice for the year.

Photo Scrapbook

If you have access to a dozen or so photos of the newlyweds, consider buying an inexpensive scrapbook and making a nice album for them to hold cherished memories of their life pre-wedding. Take advantage of craft store coupons when buying supplies to save even more money on this gift.

Personalized Christmas Ornament

A personalized Christmas ornament ready for their first Christmas together as a married couple is another great gift idea. Online stores, sites like Etsy and brick-and-mortar stores such as Things Remembered are great venues to find personalized ornaments.

Digital Kitchen Timer and/or Scale

These are two items that I really find helpful in our kitchen but didn’t take the time to buy until years after I was married. You can pick up a digital kitchen timer and a digital kitchen scale for less than $40 if you shop right.

Lawn Chairs and/or a Full-Sized Cooler

This is one of those gifts that your newlywed friends will likely use over and over again. An especially great gift if the couple likes to hang out in the great outdoors.

A Nice Blanket or Quilt

We received two really nice blankets from different people as wedding gifts and we still use both blankets nearly every single day after twenty years of marriage. Every time we use them, I think about the people who gave them to us with fond remembrance for this useful gift idea.

With a little thought, you can come up with a cherished wedding gift for your newlywed friends that won’t break your budget.

How about you all? What are your favorite smart but frugal wedding gift ideas?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/43027029@N00/1078586764/

The College Talk that You Need to Keep Having Every Year

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.

I met with some of my friends a few nights ago.  One woman I’ll call Rose has a daughter who will be a senior in high school this year.  Rose is frustrated because her daughter has her heart set on attending one of three different colleges twelve or more hours away.

The distance away isn’t Rose’s concern.  She’s concerned that each of these colleges costs $40,000 to $50,000 a year, and her daughter will not consider any other options.  Rose and her husband refuse to go tens of thousands of dollars in debt for their child’s college education, and they don’t want their daughter to leave school saddled with debt, either.

Unfortunately, this scenario will be played out across the country as upcoming seniors set their sights on their dream colleges, which often cost a fortune.

However, your child doesn’t have to be one of these kids with unrealistic expectations, especially if you talk with him regularly from middle school on about what you can pay for college.

Here are some strategies you can use to help keep your child’s expectations in line with your financial reality:

Let them pay for their own expenses

Many high school seniors who have unrealistic expectations about attending a pricey college haven’t had to handle their own budget.  Their parents may supply them with a car and insurance when they’re teens.  When it’s time to go out with friends on Saturday, they just ask mom or dad for money.  This dependent relationship isn’t helping the parents or teens.

Instead, put your kids in charge of their own budget as early as possible.  When kids are in 7^th grade, increase their allowance (perhaps based on the chores they do) and let them assume some of their own expenses.  Let them buy their own clothes and pay for their entertainment.  Don’t forget to also teach them to save.

Your child will quickly learn that she’s not earning enough money to meet all of her wants.  When she’s shopping for back to school clothes, maybe she’ll pass on the $90 jeans and instead by two pairs of the $30 jeans.  (True penny pinchers may even check out the thrift store.)

The earlier a child understands the concept of money and how far it can or cannot stretch, the more he will understand why a college that costs $50,000 a year is not feasible.

Match their own college savings

One easy way to motivate your children to save for college is to match their college savings contribution.  My husband and I want to help our children with college, but we don’t want to just hand them money that we alone have set aside for their college education because we don’t believe they’ll value the money or the education as much.  Instead, we want our kids to be invested in saving and paying for college.

Our son just turned 12, and for the last six months he’s been saving for college.  Of course, he’s also used his money for other things, but so far he’s saved $100, and we matched that amount.  We have it invested, and he gets excited seeing the money grow (even though at such a small amount it’s not earning much interest yet).  This strategy not only helps him invest in his own education, but it also teaches him about matching, which will be so important when he’s in his twenties and newly employed.  I’m quite sure, based on this experience, that he’ll take advantage of the company match on retirement savings.

Let them borrow money from you and pay it back with interest

At least once or twice, when your child’s wants are greater than her available money, let her borrow money from you with interest.  Put her on a payment plan, though make the repayment terms a bit aggressive.  Maybe she has to use 50% of her allowance per week to use to pay back her loan to you.  Also include interest.

While this tactic sounds mean, it teaches your child how constrictive student loan payments can be on a budget, especially when it’s a large student loan with steep monthly payments and the borrower is earning a relatively low salary when starting out.

Hopefully, after a time or two of borrowing money, your child will learn that it isn’t worthwhile.  If she doesn’t learn the lesson, however, feel free to turn her down for loans.  She also need to learn to stick to her budget so that she doesn’t constantly borrow money as an adult and stay in a never ending debt cycle.

Clearly outline what you can contribute to their college education

No parent likes to tell their child no, but for your own sake, you may need to.  Decide in advance with your spouse how much you plan to pay for college per child and then have a chat with your child, as early as possible, perhaps even as early as 8^th grade and then repeat the conversation every year.

This talk will help your child understand how much is available when shopping colleges, and it may also motivate her to look more aggressively for scholarships or to pick more reasonably priced schools.

Remind them grad school might be time for the school of their dreams

If your child will need to attend grad school for his chosen career path, encourage him to choose a more reasonably priced college for undergrad.  Then, he might choose the college of his dreams that is best in his field for grad school.  There are more opportunities to help fund grad school such as assistantships than there are for an undergraduate degree.

Let them apply to the unrealistic college

Finally, if all else fails and your child is adamant about the unrealistic college choices, as my friend’s daughter is, let her apply to the schools.  Once accepted, she can then fill out the financial aid package.  This may be the time that your child finally accepts financial reality.  Or, it may be the time that you’re surprised by the generous financial aid package.

I went to a community college for the first two years of college.  When it was time to transfer, I looked at our local four year college and a more prestigious four year college several hours away.  I was shocked when I got the financial aid packages.  It was cheaper for me to attend the prestigious college after financial aid, even though that college cost about 50% more.  Turns out the college had generous alumni, so that school was able to offer more financial aid.

When it comes to raising your children, college is likely the biggest expense you’ll face.  However, if you regularly chat with your child about how much you can afford to pay for college AND if you teach your child financial responsibility from an early age, hopefully you can avoid a fight over which colleges your child should plan on attending.

Most importantly, stand your ground.  A child who doesn’t get to go to his dream college will likely understand years down the road and thank you, especially when say “no” to your child and expensive college parental loans means saying yes to your own retirement funding.

How about you all? How did you handle college choices and expenses with your child?  Or, if your child is not yet that old, how do you plan to handle this situation?

Share your experiences by commenting below!

****Photo courtesy https://pixabay.com/en/graduation-grads-cap-diploma-907565/

How to Help Your Child Explore the World of Work

The following post is by MPFJ staff writer, Marie. You can read more of Marie’s articles over at her own blog, Family Money Values. Enjoy! 

In days past, finding your occupation could mean just following in your father’s footsteps.  Often, the son would follow the father in whatever occupation he had.  Hence many of our current day surnames actually derive from occupations – Smith (as in Blacksmith or any type of learned trade in fact), Taylor (as in clothing tailor), Potter (as in making pottery), and Carpenter (as in working with wood) are just a few examples.  If there wasn’t room in the family occupation for all the sons, some of them would be apprenticed out to local area businessmen.

Benjamin Franklin was apprenticed by his father into his elder brother’s printing business.

In other words, there wasn’t a whole lot of choice about what you ended up doing for a living (practically none for women in fact).

Although in recent history, we have more freedom to choose our own path, it is sometimes difficult for a young person to figure out what that path should be.  We tend to limit our choices to what we see around us – those things to which we are exposed in life.

Assuming you want your child to find one (or many) enjoyable and profitable career opportunities, how can you widen their view of what is available?  How can you as a parent (or grandparent) give the child a broad base of experience AND knowledge about current or potential future career choices?

In my book, Choose Wealth – Be a Millionaire by Midlife, I theorize that we need to be exposed to a wide variety of experiences to even begin to understand what it is we want out of life – to learn how to “dream big” and find a way to provide ourselves and our dependents with the monetary and psychological wealth needed for a happy and productive life.

There are numerous ways to help your child develop a broad base to soak up and consider the opportunities available in the world of work around them.

Here are a few of those ideas.

Activities

We all learn best by doing.  From their early years on up, encourage your child to try out different activities.  Help them find ways to learn how to draw, play a musical instrument, pitch a baseball game, dance, act, use math, organize events, see different things and experience different ways of living.  Without trying out some of these things, how will your child ever know if he or she has a knack for them or enjoys them?

Observations

Train them (and yourself!) to be aware of the world around them.  As you go through your every day life, point out how people are making their livings.  Talk to them about what the grocery clerk does, and about who owns the grocery store and what they do.  Let them know that there are behind the scenes people doing jobs to support any number of visible jobs – the engineers behind the design of the space craft, the architect behind the construction of a building, etc.

Chores

Lots of experience can be gained in your own home, by letting your child handle age appropriate household tasks such as mowing the lawn, fixing a broken lamp, doing the laundry, helping to plan an event such as a family vacation, fixing the family dinner or figuring out how much paint you need to buy to re-paint the living room.  Hands on experience with many of these will not only prepare your child to be self sufficient but will also allow them to decide if they enjoy that activity and want to pursue it.

Books

Books are the time honored way of getting outside your own world.  Encourage your child to read about other people and what they have done.  Biographies are great for this.  Take them to the library and let them pick out one at their reading level – any one that spikes their interest.

Movies

Movies are a great way to entertain your child and let them see other possibilities.  Documentaries can also feature various careers – Planet Earth for example, showcases not only photographers but also other occupations.  The One Week Job documentary follows a Canadian college graduate as he ‘tries out’ multiple jobs over a year – working each for one week.

Seeing features such as Mary Poppins or The Sound of Music can spur discussions on child care occupations.  Watching Apollo 13 with your older child can give insight into the many supporting professions behind our space program.  Watching short videos such as Curious Kids   or some of the Biz Kid$  episodes can shed light on opportunities as well.

Movies are about life.  In life we have to support ourselves.  Almost any movie can be a starting point for a discussion of career opportunities.

Family and friends

As in days gone by, our nearest career examples may be with family or a friend.  Use this.  Make sure your child knows what you do for a living and why.  Let them talk with and interview family members about their careers.  I asked members of our family to make a short video about what they do – for my grandkids to watch in my annual Grandma Rie’s Money Camp.

In my family alone, we have CFO’s, accountants, auditors, web developers, software engineers, government workers, self employed business people, farmers, chefs, lawyers, dietitians, nurses and more.  Yours is probably the same.  Use it.

School clubs & activities

Most schools at every level have clubs and activities students can join.  These can be an excellent way for kids to try out aspects of different careers.  The school newspaper (in middle or high school) can be a springboard to reporting, photography, editing, publishing, marketing and more.  The speech club can let a student decide if they like public speaking.  Math and science clubs give kids a taste of the usefulness of each.  Drama clubs and school plays and musicals help kids experience theater, back stage, directing, acting and more.

School counselor

In late middle school and high school your child’s counselor can be helpful in locating opportunities outside the school.

There may, for example, be  programs in the community to help high school students learn about careers for such as these two I found in the US Midwest:  Northland Career Center and Northland CAPS.  Some of these provide off school site programs regarding specific types of careers using area industry workers as teachers and potentially providing internships for students at area companies during the summer months.

Area college programs for high school students might also be identified by your counselor (or by you through library or internet searches).  One such program at St. Louis University has a myriad of summer workshops high schoolers can attend, such as their Adventures in Medicine and Science program workshops.

School counselors may also recommend interest or personality testing tools that can help a person figure out what they are interested in and what careers might currently be available that utilize those interests.

Summer camps

The sky is the limit on what kinds of involvement and learning can be had at summer camps for kids and teens.  Everything from STEM to sports to equestrian skills to drama and more are available.  Most camps are for profit and can be expensive.  My grandkids for example, have attended a Junior Achievement camp called Biz Town, to learn about jobs and businesses, music camp to practice viola, horse camp to learn to care for and ride horses, as well as more rounded activity camps which provide multiple types of experiences.

Civil Air Patrol

If you think your child might be interested in flight or military options, take a look at the Civil Air Patrol.  They have a youth program for kids 12 – 19 years old that (according to their site):

“The CAP Cadet Program is a year-round program where Cadets fly, learn to lead, hike, camp, get in shape, and push themselves to new limits. If you’re dreaming about a career in aviation, space, or the military, CAP’s Cadet Program is for you.”

One of my grand kid’s cousins is a youth member and has had the opportunity to fly and learn a bit about piloting.

Volunteer projects

Even kids can volunteer on projects that help them gain strengths in several areas.  Kids even start their own charities – fostering organizational skills, communication abilities, persistence and etc.  Here are 10 examples.

When your kids are young, you will probably want to volunteer alongside them – for their safety and so they can observe you in action.

Find opportunities through any number of websites including:

• Volunteer Match
• United Way
• Volunteer Gov
• National and State individual park openings
• Your local church or school

There is even a site especially for the young – Generation One

One of my nephews volunteered internationally through his church.  He had to raise his own air fare and cover his own expenses.  In return, the church sent an adult to supervise the volunteers and my nephew experienced a whole new (and more primitive) way of life while directly helping a village.  He now is aiming at a medical career in Public Hospital Administration.

Student Exchanges

Exposing your child to another culture can be accomplished by participating in your school’s student exchange program.  Most programs bring a foreign student into your home and then that student’s family reciprocates by bringing your child to their country and home.

Not only will your high school-er get in depth language practice but will see a whole new way of living and thinking – at each home.

Take your kid to work day

If your work place allows, do take your child to work on the designated day (and on other days as applicable).  Show AND TELL them what you are doing and why when they come to work with you.   Better still, if possible, let them help. Watching you sit at a computer terminal and type isn’t all that instructive without the tell part.

When my boys were high school and college age, I arranged for several of my colleagues to do a pretend job interview with them.  I paid for lunch and my boys got to interact with professionals in my field in an interview situation – without any interference from me (or even knowledge of how it went).

Job shadowing

Your child’s school counselor (or you via your own contacts or through searches) may be able to arrange for your kid to shadow other people in different career areas.  Following a doctor or school teacher or another worker around for a day or so can give your child some idea of what that career is like.  PrepScholar does a decent job of describing this.

Summer jobs

Of course, actual work experience can be the best way for your kid to know what they like and don’t.  But encourage your student to select a job, not just on how easy it is to get or what it pays or the hours but also on what they might experience while working there.

One summer I worked for a large chemical company – as a mail clerk.  But I got to deliver mail all over the executive offices and see what went on there – as well as learn about mail rooms.

Some students work throughout the year at part time jobs either before or after school or on the weekends.  It is my opinion, that unless absolutely necessary, this can be more detrimental than beneficial to a young person.

Internships

Summer internships can be had, even in high school.  If your student is willing to work for free – rewarded by the network he or she is building and the learning taking place, they are easier to land.

Advice from others

Check out the Career Planning for High Schoolers guide at the US Bureau of Labor Statistics and Wikipedia’s list of organizations providing career and technical training for more information.

Although my own grandchildren are only 12 and 9, this summer in my Grandma Rie’s Money Camp, we will be focusing on starting to explore the World of Work – using some of the above resources.  We will watch some of the movies and videos, go on field trips to observe and interview folks doing different jobs, make a movie about an interesting career and they will also have to come up with and perform a skit with a focus on careers.

How about you all? How do you help your child explore the world of work?

Share your experiences by commenting below!

****Photo courtesy https://www.flickr.com/photos/usacehq/14146897913/

4 Ways to Keep Medical Costs Low

The following post is by MPFJ staff writer, Laurie Blank.  Laurie is a wife, mother to 4 and homesteader who blogs about personal finance, self-sufficiency and life in general over at The Frugal Farmer. Part witty, part introspective and part silly, her goal in blogging is to help others find their way to financial freedom and to a simpler, more peaceful life.

With out-of-pocket medical costs continually on the rise, individuals and families need to be more aware than ever before of where the leaks are in their medical expenses. According to this 2015 Forbes article, the average family of four spent $24.671 on medical costs, with $14,198 being paid by the employer and $10,473 being paid by the employee.

This number includes both premium costs for health care plans and out-of-pocket expenses such as deductibles and prescription costs.

So how can you cut costs on medical care in a way that won’t put your health at risk or break your bank account? Here are some tips.

Choose the Plan that’s Right for You

It’s important when studying your available health care plan options that you read the fine print carefully. Depending on your current health situation and the amount of time and money you spend at the doctor and on prescriptions, etc., different plans may or may not be beneficial to you.

When choosing a health care plan, be sure to read every detail of the plan’s coverage and costs and match those benefits with the amount of time you spend at the doctor, choosing a plan that best suits your current medical needs and/or the medical needs of your family.

Practice Good Self Care

This is vitally important for those wishing to keep medical costs low. Many of today’s health maladies are a direct result of a poor diet, a high stress level and a lack of exercise. There are things you can do to avoid those health maladies. Here are some suggestions.

Eat Better

Hollywood stars such as Michael Strahan of Good Morning America recommend the 80/20 diet: Eighty percent whole foods, twenty percent junk food. I like his plan because although it does involve discipline and healthy food choices, it also leaves room for those temptations that come along with social gatherings and stressful days.

By choosing to eat well, you create an optimal environment for your body to defend itself from sickness and disease.

Get and Stay Active

Exercise helps your body to get rid of disease-producing toxins, to ward off sickness, to sleep better and to lower your stress level.

A good exercise program doesn’t have to mean running marathons or spending thousands annually on a gym membership. A simple 30-minute walk four times a week will do wonders for your health, as well a calisthenics program, a simple weight lifting routine and/or an at-home exercise video DVD.

After you get your doctor’s approval to begin an exercise program, pick a type of exercise that you enjoy, and make a commitment to be active several times a week. When it comes to exercise, every little bit helps you to have a healthier body that requires less trips to the doctor.

Keep Vices to a Minimum

Over-indulgence of alcohol and tobacco account for many health problems today. While a daily glass of wine has been shown in studies to improve health, more than that can have adverse effects. Keep alcohol and tobacco use in check, and if you feel it’s gotten out of hand, seek help.

Lower Your Stress Level

While eating well and exercising will naturally lower your stress level, it may be necessary to identify and eliminate other stress-inducing situations in your life as well. If your job is highly stressful, it may be a good idea to seek a different job or career field. If you’re struggling with toxic relationships, it may be time to seek professional help from a psychologist or counselor.

Studies indicate that stress accounts for up to eighty-five percent of illnesses, so you’d be doing your body good by reducing the stressors in your life.

Save for Health Care Costs

Health Savings Accounts (HSAs) and other types of saving vehicles can help you offset some health care expenses. Because some plans are tax-deductible, you lower your taxable income by utilizing an HSA or other healthcare savings plan. Also, using an automatic health care savings deduction plan through your employer can help you to make sure you’re setting aside some cash to cover upcoming health care expenses each year.

Re-Think Your Doctor Visits

While it’s vitally important to visit your doctor if you’re concerned about your health, research shows that nearly seventy percent of all doctor visits are unnecessary. Before you make that doctor’s appointment, call your doctor’s nurse line and ask if a visit to the doctor is necessary.

With a little research, effort and planning, you can reduce health care costs and give yourself the gift of better health as well.

How about you all? What are your tips for keeping health care costs low? How do you budget for health care expenses?

Share your experiences by commenting below!

***Photo courtesy https://pixabay.com/en/money-bills-calculator-save-256312/

How to Get Kid’s Clothing for Cheap

The following post is by MPFJ staff writer, Chonce. You can read more articles by Chonce over at her personal blog, My Debt Epiphany. Enjoy! 

I’m pretty numb to other people’s responses about how much more expensive my life must be because I have a child. Some expenses that society labels on parents can be a little over exaggerated – like the price of clothing.

I spend next to nothing to clothe my 6-year-old son year-round. This doesn’t mean he walks around with holes in his clothes and pants that are a size too small either. I probably spend less than $150 per year clothing my son and he still wears nice and sometimes new clothing. Here are a few of my favorite ways to score children’s clothing for cheap or sometimes even for free.

Shop at Thrift Stores

Thrift stores are the best places to search for discounted kids clothing. Not all thrift store clothing is good quality, but not all of it is poor quality either. Kids grow super fast, and it’s common for parents donate lots of childrens’ clothing when they don’t know any younger children to pass the items down to.

As a parent of a younger child, I know that kids don’t take very well care of their clothes so it’s nice to find some good deals on quality used clothing at thrift stores.

Some of my favorite stores for the best finds are Goodwill and Once Upon a Child. Once Upon a Child is a nationwide chain that actually pays customers to sell them their children’s old clothing, toys, and baby accessories. This store tends to sell name brand gently-used clothing for an extremely discounted rate and they have high standards in terms of the quality of the clothing. This store is best to shop at when you have younger children, but you can seriously get more bang for your buck on designer brands without paying the high price.

Visit Garage Sales

Visiting garage sales is one of my favorite money-saving activities during the summer. Since I never go on big shopping sprees when my son needs clothes, I love picking up little things here and there at local garage sales during the summer. One time I found several shirts and pairs of pants in good condition for as low as a quarter each.

To find garage sales near you with kids clothing, search online to see if anyone is advertising their event on sites like Craigslist, or be on the lookout for signs in your neighborhood. Most online ads will include some of the items they are selling and if you find local garage sales on social networks like Facebook, you can even reach out to the host for pricing and more information. Keep some cash on hand during the weekends (like $10-$20) just in case you happen to see a good deal.

Take Advantage of Retail Store Coupons and Sales

Shopping used isn’t the only way to save. Two of my favorite stores to shop at when I’m looking for new outfits for my son are Target and Kohls. Both of these stores have great sales on children’s clothing along with coupons to generate additional savings.

Most people live remotely near at least one of these popular stores. I have one right by my job and sometimes I stop by on my lunch break to scope out the clothes they have. I’ll look through the clearance rack where most items are way less than $10 to see if I find anything I need. Or I’ll make a mental note of anything I would like to get for my son that is currently listed at full price (but I won’t make the purchase that day). Sometimes, I’ll wait a while and see if certain things go on sale. Almost all the clothing at Target goes on sale after a while so if it’s not an urgent need, I’ll wait. Other times, clothing is so cheap at Target I may just purchase it regardless if it is on sale. It really depends

At Kohl’s, they also have an impressive clearance rack, along with coupons and Kohl’s cash that customers can use. You can sign up to receive coupons in the mail along with email alerts about other sales the store is having.

Shop Online

Shopping online is easier for kids than adults because it’s easier to tell what size your child is. Some online retailers like Crazy 8 offer free shipping after you spend a certain amount and other online consignment shops like like Thredup and Schoola give you a free credit so you can save instantly on your first purchase. Shopping online is convenient and can help prevent you from overspending.

Additional Tips

In addition to the options mentioned above, I do a variety of other things to keep the costs for my son’s clothing to a minimum while still putting him in nice, wearable clothes.

I accept hand-me-downs – If a friend or family member offers me hand-me-downs that their child grew out of, I almost always accept them. Even if the clothes are too big at the time, I store them away until my son can grow into them. Right now I have enough jeans stored away for him for the next two years.

I usually shop for news clothes at the end of the season – I don’t participate in the crazy back to school shopping rush outside of school supplies. For clothing, I let my son wear his summer clothes back to school in August (since it’s still pretty hot), then I purchase additional items when the prices have went down. I also always save a little extra money to grab clothing for the following year/season during the season end clearance sales.

I don’t care about brands– Finally, one of the main reasons why I am able to spend so little on children’s clothing is because I have absolutely no brand loyalty. While some parents care about their child exclusively wearing Carters or Oshkosh, I don’t set an example for my child to be materialistic and care about brands. Instead, I focus on affordability, quality, convenience. A few weeks ago, I found some Lee jeans on sale at Kohl’s for $5. It was a very convenient purchase for me, and I could care less about the brand.

How about you all? Do you set a budget for your child’s clothing? How do you minimize the amount of money you spend on children’s clothing?

Share your experiences by commenting below!

***Photo courtesy https://www.flickr.com/photos/ironypoisoning/6968717778/