A Checklist for Quitting Your Job

One of the most pervasive dreams in our culture is that of quitting your job. Whether you plan to quit and retire to some beach somewhere, or quit and start your own business so you can be your own boss, leaving a mind-numbing job might be at the top of your bucket list.

It’s important to realize, though, that quitting your job isn’t something that you can just do on a whim. You need to be ready to take that step. Here is a checklist that can help you as you get ready to move on to a new stage of your career:

1. Get Your Finances in Order Before Quitting Your Job

Before you quit your current job, you need to make sure your finances are in order and that you’re not making any of these money mistakes. Are you on solid financial footing? You should be living within your means, have a solid emergency fund built up, and be ready to cut the less important expenditures from your spending. Before you hand in your resignation, be sure that your finances are ready.

2. Diversify Your Income

While you don’t need to have side income that overtakes your “day job” income, it can help to have a little diversity in your revenue streams. Look for other sources of income, beyond what you have at your traditional job. One popular approach these days is to do some freelancing work in your area of expertise.

Depressed real estate markets have given some people an opportunity to buy apartments or duplexes for cheap and rent them out. If those don’t appeal to you, you can often get a part-time/seasonal job to help hold you over.

If your entire income is going to be in jeopardy when you quit, you need to have a little something to help pick up the slack.

3. Create a Plan

Before you quit, make sure you have a plan in place. You want to make sure you have a plan for earning more money, as well as a backup plan. Know what items you will cut from your budget. If you are starting a business, have a plan to direct you through the process. Think things through before you quit your job.

4. Have Something Else Lined Up

If you are switching jobs, you should have something else lined up before you quit your current job. This means that you should have an offer, in writing, from someone else before you leave your current job. If you are starting your own business, it helps to have the basics in place before you leave your job. If you’ve started a home business working a few extra hours in the evenings then you’ll have a foot in the door at least. Get the ball rolling, at least a little, before you quit your traditional job.

5. Refresh Your Network

Before you quit your job, make sure your contacts are up to date. Make contact with people in your professional network before you quit – just to catch up (you can ask for job leads later). Make it easy for your friend to refer you for a job.

If you have already renewed the relationship prior to quitting, you will be in a better place to let people know you have left your job down the line. An updated and supportive network can help you find a new job, or provide you with leads if you are starting your own business.

Also, keep in mind that you should try to quit your current job on good terms. Give your boss two weeks notice, and be a good worker until the end. If possible, you will want to add your former boss and co-workers to your network.

So, are you ready to quit your job? Leave a comment!

This article was originally published on October 17th, 2011 at MoneySmartLife.com

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Credit Card Debt Lessons Learned

Considering the debt I am slowly paying off, I am probably the last person that should be giving advice on how to spend money. But, since approximately 60% of Americans are in debt, I’m definitely not alone. Hopefully what I’ve learned may help you before you find yourself digging out of a financial hole one teaspoon at a time.

1. Have only one credit card – for emergencies only.

Yes. Like many people I have substantial credit card debt. As a single parent going to college, the credit cards came in really handy. Unfortunately, I did not limit it to emergencies only. For instance, when the car breaks down and you need transportation to get to work, that might be considered a necessity. But, purchasing Christmas presents you cannot really afford is not.

2. Set up a budget, and stick to it!

The idea may sound easy, but it can actually be very difficult. For example, utilities can be a challenge. In the summer the gas bill is no big deal. In the winter, you can soon find yourself wanting to burn the furniture for heat. So, take an average of the last year’s bills and plan accordingly. If you have not lived there long enough, the utility company should be able to look up the history for that address.

3. Plan for the unexpected expenses.

For instance, most people spend more money on the food bill around the holidays. When figuring costs, guesstimate high. It is better to have a little extra at the end of the month than to be caught short.

4. Learn to say “no.”

Most people are great at rationalizing when they want something. Clue: If you have to think of reasons you really need to spend money – don’t! Also, if the kids want new clothes, toys, extracurricular activity money, or whatever, say “no” if you do not have the extra money to spend. Do not suffer with a guilt complex. Consider it a lesson in the value of money and setting priorities – like food and rent. As adults, your children may even thank you.

5. Have fun only after the bills are paid.

Today, it seems like a lot of people feel entitled. As a teacher, I have seen so many children that are bleeding their parents dry financially. With both parents working, it appears to be guilt money for not being around. Kids know how to play the folks.

Anyway, you and your kids will survive if you cannot go to the movies, go out to eat, get sitters so you can go partying with friends – whatever. If you do not have the money to go out or participate in a favorite pastime, you will live. Pay the household expenses, go to the grocery store, and then have fun, if any money is left over.

Have you learned some credit card lessons – the hard way? Leave a comment!

This article was originally published on March 10th, 2008 at MoneySmartLife.com

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Five Free Financial Apps for Your Investment Portfolio

It has been said time and again, how everything is at the tip of your fingers. There is an app for just about anything these days. This includes your investments. You have more options now with your smartphone than were available on any platform just a few short years ago. Get quotes, analysis, breaking news, place trades, and more, all with a few swipes of the finger. For those adept enough to navigate the swirling waters of these volatile markets, there are some great resources out there.

Here are some iPhone apps that can keep you in front of the market movements. By the way, many of these are also available for Android.

Great Investment Apps

1. Bloomberg

He may be trying to limit your soda intake in the Big Apple, but his company has been one of the top names in financial news for years. Bloomberg has an app that will give you all the breaking news to help you keep track of the markets. You can customize the app to specific industries or companies. Additional features allow you to keep track of index movements, follow currencies and monitor your portfolio all from one place.

2. E*Trade Mobile

The baby in the commercials wasn’t lying. The highest rated app in terms of trading software (vs Fidelity, Schwab, etc), the technology on this app is a step above its competitors. You can follow your portfolio, place trades, keep track of open orders, manage your cash and even watch CNBC videos on demand (app is free, but trading costs do apply).

3. Kcast Gold Live!+

Could this be a game changer for you? Maybe . . . with this app you can not only keep track of gold prices, you can also monitor other precious metals and currencies. You can get full screen technical charts to analyze trends from anywhere.

 

4. Seeking Alpha Portfolio

The “#1 website for serious investors” now gives you an app to take on the go. Continue to get great articles and investment ideas that have made Seeking Alpha a great investment resource for people all over the world. You can set different themes to focus on dividends, small cap, emerging markets, and more.

 

5. Trade Interceptor Forex Mobile

This is a multi-broker Forex app that allows you streaming quotes from the top trading companies in the world. You can get market data, analyze charts, set price alerts and keep your eye on trends. There is also a desktop application you can set up and free tutorials and webinars available on their website.

There is some overlap between these apps. You will most likely not need all five, but each offers great resources the others do not. Ultimately, it is the news that helps investors make decisions, and there are plenty of other websites and apps you can add to this list. Whether you fight this battle alone or use a financial advisor, these options can help you stay informed. Pick and choose, add new ones, but use something. Making uninformed investment decisions can be one of your biggest mistakes.

What are a few of your favorite investment apps? Leave a comment!

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Best Credit Cards for Parents of Young Kids

Having young children is an enjoyable, challenging, and expensive time of life. If you are going to be spending so much money, why not try to get cash back, points, or other credit card perks? If used wisely, credit cards can save you a ton of money by generating extensive rewards on your normal everyday spending.

That is, if you have the right credit cards.

Best Credit Card Tips for Parents with Young Kids

Before you run off to apply to every credit card company under the sun, you need to know what to look for in your next credit card. Each situation is different because every family spends money in different ways. Knowing your own family’s spending habits is key.

Criteria for Selecting a Credit Card

Here are some criteria to consider when picking out a credit card:

• No annual fee (unless you will get significantly more rewards than on other cards and the difference is worth the annual fee).
• Rewards make sense for your family’s spending.
• One card that covers 90% of your spending needs is better than five cards covering 95% of your spending – make your life as simple as possible.

How Many Credit Cards to Juggle

Theoretically you could carry 16 different cards around for each specific spending situation. Card A is for the grocery store. Card B is for the toy store. Card C is for gas.

But that is complicated. You’d have to keep a laminated chart in your wallet or purse to remember which card goes to what store.

That having been said if you think two cards will give you the best possible return on your spending there is nothing wrong with that. Having a couple of cards to maximize your returns can make sense, but only if you can handle it. You are shooting yourself in the foot if you get three new credit cards and can’t handle the responsibility. You’ll likely end up with credit card debt that wipes out all of your rewards and cash back.

Target Specific Stores or Categories

If you only fill up your gas tank once per month then a gas rewards credit card isn’t going to do you much good. Target the categories that you spend money on the most. For young parents this is likely things like groceries, pharmacies, and general spending at stores like Wal-Mart and Target.

3 Credit Cards for Parents of Young Kids to Consider

Here are three cards to choose from to help you earn great rewards while having young kids.

Fidelity Rewards American Express Credit Cards

American Express offers a handful of cards that are tied to the brokerage company Fidelity. These cards offer 2% cash back on all spending. That cash back can be deposited into a Fidelity investment account, a 529 account for your child’s education costs, or a retirement account. If you choose the investment account the money can be withdrawn easily. You have to wait until you spend $2,500 and earn $50 in rewards before the money is deposited, but they allow you to set up automatic transfers so every time you hit the $50 cap it transfers into your account.

This card gives a healthy cash back amount for all of your spending. It is a great general purpose card for those times that you don’t have a rewards card tied to a specific type of spending.

PenFed Platinum Rewards Visa Card

PenFed Rewards cards are certainly one option to consider. Pentagon Federal is a credit union you can join if you are a member of a couple of specific organizations:

• You work for the US government or are in the US Military (or are roommates with someone who is).
• You work for specific organizations that have teamed up with PenFed in the local area.
• You join one of two other organizations: Voices for America’s Troops or the National Military Family Association; the former has a $15 one-time fee and the latter has a $20 one-time fee.

The rewards card is fantastic: 5 points per dollar spent on gas, 3 points per dollar spent on supermarket purchases, and 1 point per dollar on all other spending. Points are worth 1 cent, so the 5 points per dollar on gas is like getting 5% cash back. (You can convert points into gift cards including Visa gift cards that you can spend anywhere.)

TrueEarnings Card from Costco and American Express

If you are a young parent you might just have a membership to Costco. Buying in bulk can reduce your costs if you actually use everything you buy. Costco only takes cash, debit cards, or AMEX. They have teamed up with AMEX to offer the TrueEarnings card. It is an AMEX credit card and Costco card combined. You get 3% back on gas at all US gas stations (including Costco) up to $4,000 per year in purchases, 2% back at US restaurants, 2% back on travel, and 1% back on all other purchases. There is no annual fee as long as you pay your Costco membership.

Which card seems right for you? Leave a comment!

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Top 10 Books for the Unemployed

Few of us like the idea of being unemployed. Looking for work is difficult and demoralizing. However, it can also open up new avenues. Many people use their time without a job to improve themselves and look for new opportunities.

If you are looking for inspiration, or just looking for helpful hints, here are 10 books that you can read while you are unemployed to help you boost your efforts to improve your life – and maybe even find another job!

Read through these books as quickly as possible to boost your chances of coming up with new employment ideas before you get in a financial pinch.

1. Who Moved My Cheese? by Spencer Johnson: If you have lost your job suddenly and you are wondering why these outside forces are impacting your life, this is a great book to start with. It’s about change, and taking charge when events outside your control affect your life.

2. iJobless: 50 Ways to Survive Unemployment by Jenny Holmes: Once you lose your job, you need to find a way to lower your monthly expenses. This book is chock full of ideas for stretching your dollars, and suggestions for earning a little extra money on the side.

3. Landing on the Right Side of Your Ass: A Survival Guide for the Unemployed by Michael B. Laskoff: This slightly irreverent look at unemployment can help you figure out how to move on from your lost job. One of the great things about this book is that it is upbeat about helping you see the good in your situation.

4. Falling Forward: Turning Mistakes into Stepping Stones for Success by John Maxwell: You don’t have to view mistakes as failure. In many cases, the most successful people have many failures behind them. This book can help you create a plan for learning from your mistakes and turning failure into success.

5. Work at Home Now: The No-Nonsense Guide to Finding Your Perfect Home-Based Job by Christine Durst and Michael Haaren: As a home business owner, I love this book. You find a good home based business opportunity, and learn how to boost your income without having to go into the office.

6. How to Win Friends and Influence People by Dale Carnegie: This business classic can provide you with tips on networking. When you’re unemployed, you need to know how to make yourself more likable, connecting on a level that can help you get your next job – or start a business.

7. The Job-Hunter’s Survival Guide: How to Find Home and Reward Work, Even When “There Are No Jobs” by Richard Bolles: Want to do something meaningful with your time? Use this book as a guide to help you find work that matters, even in an economy like this one.

8. Rework by Jason Fried and David Heinemeier Hansson: Want to start your own business? This book offers you the advice you need to get going. It’s a great way to learn the basics, and turn your unemployment into an opportunity to “rework” the way you approach your career.

9. Little Victories: Conquering Unemployment by Tom Brophy: This is another inspiration book that can help you get through the frustrating aspects of unemployment and the job hunt. You also learn how to find the victories in life, and hold on to those.

10. The Bliss List by J.P. Hansen: Want a career that makes you happy? This book can help you get there. Hansen offers a look at how you can create the career that makes you happiest by following your bliss.

While unemployment is a challenging time, it can also be a time for reflection and transformation. It might be just the time to rethink your career goals and life goals, and embark on a new adventure.

What is your favorite book about career and unemployment? Leave a comment!

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How to Find a Job (and Enhance Your Career) Through Social Media

We mostly think of social media as being a playground for teenagers, college students, and young adults. But it can be a lot more than that, particularly as it relates to your career.

Social media provides a quick and fairly easy way to get connected with people who you might not ever meet in your everyday life. That gives you an opportunity to get to know other people in your industry or career field – including some of the major players – and that has serious implications when it comes to finding a job.

Find a New Job

It’s not uncommon for people to use the social media as a way of finding a job. In fact, that might even be the social media’s primary career use – at least at the moment.

It provides a job seeker with a way to network with other job seekers and even with potential employers. Not only is this a quick way of reaching the people who do the hiring, but it saves you a lot of time and effort that you would have used to make phone calls, write letters, and even pay a few visits back in the days before social media existed.

Some employers are even rumored to troll around social media websites looking for prospective candidates to fill jobs. If you’re in the right network groups, and you are not too “over the top” in trying to find a job, an employer just might find you and invite you to come in for a chat.

But you already know all of that. Let’s take a look at a few ways that the social media can help you to enhance your career – even if you’re not looking for another job.

Develop Industry Contacts

You’ve heard the saying it’s not what you know, but who you know, and social media can certainly help you with that. Nearly everyone who is anyone in the business world has some sort of social media profile. They may have it on Facebook, Twitter, LinkedIn, or some other business related social media, but they’re out there somewhere on the web.

If you can reach some of the people who are more influential in your industry, that opens up all kinds of possibilities. Instead of going to the social media only when you need to look for new job, try spending some of your off-hours time using the various media sites to just chat. Keep your conversation business related, and just try to join in discussions wherever they are. You’re not looking to get anything here, but just to participate.

It’s amazing how open influential people can be when they sense you are not looking for something from them. You should use those discussions to build relationships and build trust with various well-positioned people in your industry. This might give you a handle on what is going on in the industry that you won’t read about in the newspaper. You might be able take some of those ideas and perspectives back to your own employer and make suggestions that could help your company move forward.

Often, just being able to drop a name or two from a major competitor can make your employer take you a lot more seriously. At a minimum, your company will respect the fact that you know some important people, and that you take a deeper interest in their business than most other employees do.

Success in a job is often about properly positioning yourself. Developing relationships with important people in your industry can do nothing but improve your position.

Become a News and Information Source

If you’re having difficulty making contact with influential people, then you may want to shift your strategy to one of drawing them to you. You can do this by becoming a source of news and information within your industry. That doesn’t mean that you should become the equivalent of a newspaper journalist on the social media, but what you can do is take the relevant stories of the day and offer your own analysis.

Most social media networks have various discussions going on where the participants are giving their own opinions on significant news. By contributing to these groups on a regular basis, you can become something of a center of influence within the network. You might even consider becoming a forum- or discussion-leader on one or more important network groups.

This kind of social media participation will accomplish two things:

1. It will draw people to you so that you don’t have to go looking for them, and
2. you will be in the thick of what’s going on in your industry, and that will raise your value with your employer.

People represent opportunity – the more you know, the more opportunity you will gather. It’s all about getting connected. If you know enough of the right people, you will become more valuable just for that fact alone. You’ll get to know the “Who’s Who” of your industry, as well as become a source of information and ideas.

Find Potential Clients for Your Company

Still another possible social media use in your career is using it to find potential clients for your employer. Anyone who is self-employed or in sales is familiar with the idea of using social media to generate business. Employees typically don’t. Just the fact that you are out there using the social media to increase your employer’s business will make you stand out above the rest of your coworkers.

This may involve networking outside of the groups you normally would if you were looking for a job. You want to target groups of likely customers for your employer’s products and services. For example, let’s say that you are a real estate appraiser looking to get business. Two excellent groups to connect with would be mortgage brokers and real estate agents. Who the target groups would be in your case depends on what industry you work in. Find out who the likely target groups are, then start networking with them.

Once you get into networks where potential clients and customers are likely to be, use the same methods described above to make contact. That means that you “talk shop,” and build relationships. As you do, you can think of yourself as a representative for your company in that network group.

If you can bring a few customers or clients into your company – even though you don’t work in sales – you will raise your value to your employer. In the process, you may even create a new position for yourself, like becoming your company’s social media manager. And for what it’s worth, some companies do actually have such a position!

How has social media helped your career path? Leave a comment!

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5 Tips for More Effective Business Networking

These days, who you know matters. Whether you are a business owner looking for a partnership or some other deal, or whether you are trying to advance up the corporate ladder, a good network can help. Even if you are unemployed, the right approach networking can help you find a job.

If you want to boost your networking efforts, here are some tips that can help you improve your chances of seeing the outcome you want:

1. Figure Out What You Want to Accomplish

You are always more effective at anything you do when you know what you want to accomplish. This means you need to consider your goals, and figure out how networking can help you reach those goals.

In many cases, the goal of networking is simply to establish contact with like-minded people, or find associates that can help you later. However, if you have a specific purpose for networking, such as expanding your client base, finding a job, or angling for a promotion, keep that in mind.

2. Prepare Your Elevator Pitch

One of the most effective networking techniques is letting others know what you do. This way, those you meet can quickly see how they can help you. Take the time to craft a good elevator pitch that explains who you are and what you do in under 45 seconds. It may take a few times to refine your pitch. One thing you can do is think about how you describe yourself on social media, or how you would explain what you do to a stranger at a dinner party. When you are clear about who you are, what you do, and what you have to offer, those you meet are more likely to immediately connect you with needs that others may have.

3. Decide Whom to Approach

Now that you know what you want to accomplish, you need to decide which contacts are most likely to be valuable to your efforts. Do a little research and figure out whom to approach. Are there specific people known in your field that are likely to be useful contacts to have? Is there someone well-connected with a network that you can be plugged into?

Sometimes it’s not about the network and more about the knowledge and expertise. Identify contacts who can offer help and advice. Even if you aren’t hooked up with an amazing opportunity, you can still receive useful information that will help you proceed going forward.

4. Contact the Person through Multiple Channels

This is easier when you are at a networking event. At conferences, trade shows, and other events, there is a certain expectation that networking will take place. You can contact the person easily, and converse with them. Then, after you get home, connect on LinkedIn, adding a short personal message about how you met. This is important, since it reminds the person that you do have a personal connection.

You can make connections online, though. After you have prepared your social media profiles, and after have made a few interesting observations, start following the person. Leave a good comment or two on his or her blog. Follow on Twitter and retweet a few items. You want to be careful not to cross the line into online stalking, though. Once you have had a few such interactions, you can email the person and ask for advice or help. Just ask a question or two, and express your interest in learning a little more.

5. Give Back

Make sure that you give back. When you are part of a network, you are expected to be able to contribute as well. When you receive help, be appreciative. When something useful comes in your way, or you learn of a new tip, pass it along to those in your network. When you show yourself helpful, others will want to help you in return.

What are some other effective business networking tips? Leave a comment!

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5 Websites that Help Homebuyers

With the power of technology getting faster and smaller, every industry has had significant changes. The real estate business is no exception. According to a recent survey completed by the National Association of Realtors (NAR) and Google, real estate related searches on Google have grown 253% over the past four years.

These searches have helped potential homebuyers find real estate agents, research specific communities, take virtual tours of homes and learn about rates and other options as well. Purchasing a home is the largest investment most people make in their entire lives. It is worth spending a little time to utilize the resources that are available to educate yourself before you even walk out the door to go see your first open house. Here are some websites that will help guide you in your pursuit to purchase a home.

1. HUD U.S. Department of Housing and Urban Development

This government website gives you the basics on everything from looking for loans to home inspections. It has resources for buyers to learn their rights in the process, video tutorials to help educate and a list of home-buying assistance programs that everybody should check before buying a home. Have any questions? You can call and speak to a Housing Counselor too (some charges may apply).

2. City-Data.com

If you want to learn about a specific area, this is the website to do it. They have taken data from multiple sources to give you everything including average household size, median household value, population statistics and unemployment. Maybe you are Lithuanian and want to see if there is a neighborhood with a large population of people from that country. This website can help you find that.

3. SchoolDigger.com

The quality of a school district or specific school will tell you a lot about the potential value of the properties in the area and whether you want to raise a family in a nearby neighborhood. According to the website, they have had over 26 million visitors and can provide information on over 120,000 schools in the U.S. You can compare performance, test scores, student/teacher ratios, and enrollment among other items.

4. Mortgage Loan.com

For a one-stop resource on mortgages, this website has it all. There are consumer guides and articles to teach you, financial calculators to figure out what you will need and rate maps and comparison tables for you to see what the landscape looks like. You can keep up to date with mortgage news and also read lender reviews. If you are looking for a first mortgage, a home equity loan or to refinance, this is a great place to start.

5. Realtor.com

You’ve done the research. You figured out which town, neighborhood and school you want to buy a house near. Now you need to find that house. Realtor.com can help you start that search on your own, but it can also help you to find a real estate professional that knows the area and the houses you want to see. You can search for a realtor using filters to help you find the most qualified. Their profiles will give you an introduction on what type of business they handle.

Don’t want to use a realtor just yet? You can search home listings (for rentals too) yourself. You can look at current home listings and foreclosures, as well as recently sold homes to get an idea of prices. You can filter by size, price, features, amenities and more. Find out what open houses are coming up and watch the videos to see the houses before you step out of the house.

As with any other investment, you can handle a lot of this research yourself. The use of a realtor, however, is very helpful if you do not know the area you are looking to buy in. They are local residents that know the area. They can give you insight that a website cannot. They can also help homebuyers sift through hundreds of house listings to pinpoint the ones that fit their wants and needs.

Regardless, this list can get you started on your pursuit to purchasing a home. Good luck and be sure to leave a comment about your quest for a new home!

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Student Loan Options – Comparing Types of Student Loans

The cost of college tuition and living expenses like room and board continues to rise. The increasing costs of college do not appear to be slowing down any time soon. Over the last 10 years private non-profit college tuition has increased 65% while their public school counterparts increased 104%. Last year alone public school tuition, on average, increased 4.8%.

All of this leads to a larger percentage of students needing significant student loans to get through college. There are a wide array of loans available with different cost structures. Knowing the difference between different types of student loans can help you minimize the financial damage of going to college.

Understanding Different Student Loan Options

The easiest way to think about student loans is to group them into categories based on whether or not the interest on the loans is subsidized; and, who can take out the loans.

Subsidized Student Loans

Subsidized loans are loans where your interest is paid for by another party for a period of time. When you take out a loan to pay for your first freshman semester the interest calculations on the borrowed amount start immediately; they don’t wait until you graduate. With a subsidized loan that interest while you are in school is paid on your behalf. With subsidized Stafford loans the federal government is the third party paying your interest while you are in school.

Unsubsidized Student Loans

The opposite is true with unsubsidized student loans. While you do not have to make payments on the principal or interest during your time in school (and a grace period after you graduate) the interest is not paid for by the federal government. From the moment you take out that first loan the interest accrues and is rolled into your loan principal amount. This leads to higher balances upon graduation.

Who is Eligible to Receive a Student Loan

You might think that only the student can receive student loans in their name to pay for school, but this is untrue. Some loans can be taken out by the student’s parents to assist in paying for college.

Comparing Student Loans

Here is a comparison of the different student loans based on the above criteria.

Subsidized Stafford Loans

• Require you to demonstrate financial need.
• Require you to remain enrolled at least half-time in an eligible degree or certification program.
• Require you to be a U.S. citizen or eligible non-citizen.
• Allow you to borrow a maximum of $23,000 total. (There are limits based on your year of schooling: $3,500 for the first year, $4,500 for the second year, and $5,500 for all years after that.)
• Require you to begin making payments six months after graduation (or no longer qualifying due to dropping out or dropping below half-time enrollment). The six-month period post-graduation is called the grace period.
• You may request a deferment – essentially asking to postpone when your payments begin. Subsidized loans will continue having the federal government paying your interest.
• You may request a forbearance – however, interest will still accrue and capitalize (meaning added to your principal amount).
• Have a fixed interest rate of 6.8%.
• Loans typically must be repaid within 10 years but different payment plans are available.

Unsubsidized Stafford Loans

• Do not require you to demonstrate financial need.
• Require you to remain enrolled at least half-time in an eligible degree or certification program.
• Require you to be a U.S. citizen or eligible non-citizen.
• Allow you to borrow different maximums of loans depending on your situation:
  • There are limits based on your year of schooling: $3,500 for the first year, $4,500 for the second year, and $5,500 for all years after that.
  • If you still have financial need you may borrow up to another $2,000 per year in unsubsidized funds.
  • You may borrow a maximum of $31,000 total of which a maximum of $23,000 may be in subsidized Stafford loans. (If you do not qualify for Stafford loans, you may borrow the full $31,000 total as unsubsidized Stafford loans.)
  • If you need additional funds and your parents do not qualify for PLUS loans, you may borrow to a maximum of $57,500 in Stafford loans.
• Require you to begin making payments six months after graduation (or no longer qualifying due to dropping out or dropping below half-time enrollment). The six month period post-graduation is called the grace period.
• You may request a deferment – essentially asking to postpone when your payments begin. Subsidized loans will continue having the federal government paying your interest.
• You may request a forbearance – however, interest will still accrue and capitalize (meaning added to your principal amount).
• Have a fixed interest rate of 6.8% (assuming you received the loans after July 1, 2012).
• Loans typically must be repaid within 10 years but different payment plans are available.

Perkins Loans

• Require you to demonstrate exceptional financial need.
• Require you to remain enrolled at least half-time in an eligible degree or certification program.
• Require you to be a U.S. citizen or eligible non-citizen.
• Allow you to borrow different maximums of loans depending on your situation:
  • You may borrow $5,500 per year as an undergraduate to a total of $27,500.
  • You may borrow $8,000 per year as a graduate student to a total of $60,000.
• Require you to begin making payments nine months after graduation (or no longer qualifying due to dropping out or dropping below half-time enrollment). The nine-month period post-graduation is called the grace period.
• You may request a deferment – essentially asking to postpone when your payments begin. Subsidized loans will continue having the federal government paying your interest.
• You may request a forbearance – however, interest will still accrue and capitalize (meaning added to your principal amount).
• Have a fixed interest rate of 5.0% (assuming you received the loans after July 1, 2012). Interest is paid by the federal government as long as you are currently enrolled, in a grace period, or in deferment.
• Loans typically must be repaid within 10 years; there are different payment plans available but they are limited.

PLUS Loans

There are two types of PLUS loans: one for graduate students and one for parents of students.

• Graduate PLUS Loans
  • Loan eligibility is based on your credit worthiness as well as your enrollment in a degree program at least half-time.
  • You can borrow up to the total cost of your education minus any other aid you receive.
  • New Grad PLUS Loans moving forward have an interest rate of 7.9%.
  • For loans funded after July 1, 2008 there is a six-month grace period before loans payments must begin.
  • You may request a deferment or forbearance. Interest will accrue and capitalize during these periods.
• Parent PLUS Loans
  • Loan eligibility on three factors: enrollment, credit worthiness, and being a parent, step-parent, or legal guardian of the student.
  • Parents can borrow up to the total cost of attendance at the school minus any other aid the student receives.
  • There is no borrowing limit.
  • Borrowers have 10 years to repay the loans. The typical deferment and forbearance options are available.
  • Parents have two options to begin paying back the loans: either before 60 days has passed once the loan is funded or six months after the student graduates, drops out, or falls below half-time enrollment.

Private or Institutional Loans

Unfortunately there aren’t any set options for private loans or loans provided through the school that are not backed by the federal government. That means interest rates, deferment and forbearance options, and loan terms are all dependent upon the lender. However, due to the rising cost of tuition some students or parents may need to take out private loans in order to pay for the college education they desire.

Do you have student loans or are planning on getting them? Leave a comment and tell us what your plan is!

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How to Figure Rate of Return on Investments

We don’t invest money in our retirement accounts just to see what happens. We all want high returns, positive growth, and a big pile of cash to retire on. Investing your funds through automatic investments is a great way to start, but at some point you have to do some math to figure out if you are earning a return or not.

This is surprisingly difficult.

Brokerage firms and mutual fund companies don’t want to make it easy for you to calculate your personal rate of return on an investment. Why? Because you might be able to see that the marketing materials they put out aren’t exactly accurate.

Inaccurate marketing about the rate of return on mutual funds is somewhat inevitable even if the companies wanted to give you accurate information. This is because every investor will invest money into the fund at different times, at different amounts, and at different intervals. Unless all investors are following the exact same investment plan then the returns will be different.

That’s why knowing how to calculate your own rate of return on your investments is so important. Don’t accept simple marketing material or vague reports at your return. Here’s how to calculate your rate of return.

How to Calculate Accurate Rates of Return on Your Investments

There are three methods to calculate your returns. You should use two of them at best.

Do Not Use Arithmetic Rate of Return

Using average annual rate of return or average annual arithmetic return will not be an accurate showing of your rate of return on your investments. It is a simple equation where you add up all of the returns for the time periods you are looking at, then divide by the number of time periods.

The average annual rate of return can be calculated as: (Rate of Return Year 1 + Rate of Return Year 2 + Rate of Return Year N) / N.

For example, you invest $1,000 (Investment) and in one year it grows to $1,500. Your return is $500. (Return Year 1). The following year it drops back to $1,000 (Return Year 2) and you return is -$500.

The first year’s rate of return is 50% ($500 growth / $1,000 investment). The second year’s rate of return is -33.33% (-$500 growth, divided by $1,500 investment).

If you add them together and divide by two years, you get 8.5% as the average annual rate of return. (50% minus 33% = 17%; 17% divided by 2.)

The average annual rate of return over the two years is positive and quite healthy at 8.5%. However the actual return is 0% because the money grew to $1,500 then shrank back to the starting investment amount of $1,000. We can also tell this is inaccurate because if you multiply $1,000 by 8.5% growth (and then again by 8.5% growth) you would end up with $1,177.23 instead of $1,000.

Use Geometric Rate of Return

A far better calculation is compound rate of return, also known as average annual geometric return or time-weighted rate of return. This shows how much the investment grew due to compounding over a certain number of time periods.

Hang with me – incoming math!

To use the time-weighted rate of return we need:

1. The rate of return for each time period (50% in year 1 and -33% using our example above)
2. Add one to each rate of return (50% becomes 1.50 and -33% becomes .667)
3. Multiply the rates of return together from step 2 (1.50 x .667 = 1.0005)
4. Take the root of the product in step 3. The root number is equal to the number of time periods. In our example the number of periods is 2, so we need the 2nd root of the product in step 3. (2nd root of 1.0005 = 1.00025)
5. Subtract one from the result (0.00025; 0% rate of return due to rounding)

However, there is only one problem with geometric mean rate of return . . . it only tells us what the rate of return is on one chunk of money invested over time. It doesn’t take into account (or at least, not very easily) dividends and other contributions to your retirement accounts.

Use XIRR or Internal Rate of Return

Enter the XIRR formula to tell us how our portfolio grew. XIRR is a spreadsheet formula that is used to account for cash flows.

To use it, you need:

• a spreadsheet program like Excel, OpenOffice, or LibreOffice (the last two are free open-source tools)
• dates and amounts you contributed to your portfolio
• beginning and ending balance of your portfolio

The spreadsheet does the rest. Of course if you are using dollar cost averaging and investing every week or two weeks . . . and have been doing this for years . . . then you’ve got some data entry in your future.

Million Dollar Journey has an excellent post explaining how to use XIRR to calculate your portfolio’s returns that includes a simple example.

How Should I Calculate My Portfolio’s Returns?

At the end of the day, even though it is more complicated to use, XIRR is going to tell you exactly the annualized rate of return you received on your investments. If you had a lump sum of cash that you invested, never received dividends on, and never contributed to again then you could use geometric mean. Otherwise XIRR is going to be the most accurate.

Have you figured the rate of return on your investments? Leave a comment and tell us which method you used!

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