How to Manage Money Properly

How to Manage Money Properly, without losing to much of your fun times. Americans are spending money left and right and not understanding as to why it always gone. The american people do not protect what essentially could be their financial status, and well being. One thing I wish people would stop complaining they have no money, as well as quit asking to borrow it.

How much are you really spending on your luxury or useless items each month, this does include eating out. One of my best friends just told me the other day he probably just wastes $6,000 a month on stuff he does not need. Just for example he wastes money on: snake. Okay lets take a look on how to save your money, and make money with it.

How to Manage Money Properly:

1. Open a bank account, preferably one at a credit union.

2. Every paycheck you get, take no less than 10%, but try to do put the recommended 25% into your account.

3. Get a bank account that transfers your change leftover from your purchases into your savings account.

4. Spend less on luxury items, I know this seems harsh, but it is necessary.

5. Eat out less, you will save an average of $3800 a year if you just ate at home and imagine having this in your account every year! This is like having an extra tax return each year. When you feel the urge to go and eat, go to the bank, estimate what you would have spent and put it into your savings.

6. Grocery shop wisely, and spend the little extra to get healthier foods.

7. Change your own oil, it usually costs around $20.

8. Spend the extra.20 cents a gallon for the premium to get better efficiency on hp and/or gas mileage.

Realistically this list can go on for years, but there are so many ways to save money, these are some of the most common issues that people are talking about where they lose money on. How to Manage Money Properly, well really just stop spending so much and it would be there.

Ask Bankrate: Questions about losing money in IRAs, the future of the housing market and more

Ask Bankrate is a recurring feature where Bankrate’s experts answer your financial questions. Visit this page for more information on how to submit your question. Click on a question here to jump straight to it.

Questions:

  • Entering retirement. Should I go all in on cash or bonds?
  • My IRAs are losing money. Should I still make contributions?
  • How will COVID-19 affect the housing market?
  • What should I do with a $125K windfall?
  • Is buying a business a good way to grow my money?
  • Retiring soon. Does it make sense to buy a vacation home?

Q1: Entering retirement. Should I go all in on cash or bonds?

I’m just entering retirement, and I’m tempted to go to all cash or all bonds to be safe. I’m still down about 10 percent from the hiccup in March. Is this a smart move?

— John U.

Answered by Stephen Kates, CFP: “As scary as the recent drop in the market has been, taking your assets completely to cash will leave you in the difficult position of (1) having little to no growth on your assets until you reinvest and (2) trying to time when to return to the market. I suggest staying invested in a balanced portfolio of stocks and bonds.

Since the market drop, have you rebalanced your portfolio? One of the most important ways to manage your investment portfolio is to rebalance after significant market movements. You likely saw your stock investments fall in value while any fixed income you have likely didn’t move nearly as much. If your asset allocation is different from your target allocation, you should adjust it to bring it back to your target allocation.

If you feel uncomfortable returning to your prior allocation pre-coronavirus, you could reduce your stock exposure, but this will lengthen the time you will need to recover your lost value and slow down your long-term growth. If you have a solid emergency fund to use as a cushion (for retirees, I suggest 6-12 months of expenses), continuing to invest will give you the necessary growth throughout your retirement to keep up with inflation. Today is only the beginning of your retirement journey, and it often lasts for many decades. Growth now is just as important in retirement as it is pre-retirement because although you are planning to use this money for income, you need to also continue to invest it for years to come.”

Q2: My IRAs are losing money. Should I still make contributions?

I have a traditional IRA and a Roth. Considering both are just treading water in today’s economy, should I continue to put monthly contributions into those accounts when I see them losing money?

— Michael Mi.

James Royal, senior investing and wealth management reporter: “It sounds like you have your money invested in stocks or bonds, rather than holding cash in your IRA. If that’s the case, it can be stomach-churning to see your investments fall as the market gyrates. But tax-advantaged accounts such as IRAs offer a great benefit in helping you save for retirement, and you won’t be able to make any further contribution for a tax year once the tax-filing deadline runs out. So you have limited time to take advantage of it.

If you don’t feel comfortable investing the money today, that doesn’t mean you can’t still take advantage of the tax benefits today. You can still deposit the money in the account but leave it as cash and then invest it later. A Roth IRA may be an especially good option here, because it allows you to withdraw any contributions later without a tax penalty, if you have another pressing need. That said, the traditional IRA may get you a tax break today, saving you some extra money. But the key point is this: Because of the time limit on your contributions, you can’t get the tax advantages unless you deposit the money. Finally, while it’s not clear how you’ve invested, take a look back at the performance of the SP 500 index over the past 30 years or so. While the index has dipped – sometimes nearly 50 percent in less than a year – it’s continued to climb over the long term. If you’re investing, you need to think at least five years out and adjust your expectations to that reality. Otherwise, you may be likely to sell just when the market is at a low.”

Q3: How will COVID-19 affect the housing market?

How will COVID-19 affect the housing market over the next year? Will we see a decrease in valuation as forbearance agreements and unemployment hammers our economy? Or have enough measures been taken to protect the housing market, continue driving demand and appreciation of home values?

— Erick D.

Answered by Jeff Ostrowski, senior mortgage reporter: “You pose a trillion-dollar question, one with no clear answer. The U.S. housing market has held up remarkably well since the pandemic hit. Demand for homes has fallen, which is a predictable result of a spike in unemployment. However, the supply of homes for sale has fallen even farther, as homeowners have decided not to sell. The short-term result has been a continued rise in home prices, along with bidding wars in some markets. Many housing experts say the pandemic has created fresh demand for housing — those who can afford it are shopping for bigger homes.

While the housing market has seen a long run-up in valuations, the latest housing boom serves up nothing like the frothy conditions — overbuilding, loose lending standards — that led to the Great Recession. During the past decade, housing starts were tepid, lenders were strict and homeowners amassed a large equity cushion. All of that acts as a shock absorber for the housing economy during this bumpy ride. Of course, the path of the economy and the trajectory of the pandemic are unpredictable. A continued resurgence of COVID-19 cases, or a spike in unemployment, would act as a drag on housing prices. And it’s worth remembering that housing markets are intensely local: Areas such as Las Vegas, Honolulu and Detroit have been hit especially hard by this recession, and values could take longer to recover there.”

Q4: What should I do with a $125K windfall?

I have my retirement accounts in good shape and a six-month cushion for emergencies. My job is reasonably secure, and I expect to work for about 12 more years. I now have about $125K in cash that I need to deal with. I’m reasonably familiar with safe savings investments and know something about self-directed brokerage accounts, but I’m not sure what makes sense. I don’t mind risk, but I don’t want to bet the entire amount on something crazy. What are your thoughts on dealing with this windfall?

— Michael Ma.

James Royal, senior investing and wealth management reporter: “Congratulations on having your financial house in order and then thinking about what makes sense for your windfall. How long is your time frame? Is it the full 12 years you expect to work? If you’re looking to access the money in less than three years, your best option is likely an FDIC-backed CD, which offers you a return with no risk that you’ll lose your principal, up to $250,000 per bank.

If you’re able to go the full 12 years without accessing the cash, then you have the potential to generate more interesting returns. Superinvestor Warren Buffett recommends that investors looking to build wealth in the stock market turn to an SP 500 index fund and then continue to hold that for the long term. Yes, stocks can be volatile, as we’ve seen this year, but by investing for the long term, you’ll be able to ride out the market’s short-term dips. Over long periods, the SP 500 has returned about 10 percent annually to investors – but only if you held on through the tough times. The index is well diversified, holding hundreds of America’s best companies, and is about the safest way to invest in stocks. That said, if you want further diversification, it could make sense to add some bonds to that mix, which will make the overall portfolio less volatile and provide you more income.

It can be tremendously helpful to consult a financial adviser on these issues, but you’ll need someone who’s looking out for your best interests – here’s how to find one – and who helps keep you on the right track over time.”

Q5: Is buying a business a good way to grow my money?

I would appreciate your advice relevant to me in two finance matters:

  • I quit a job at the onset of COVID-19 early this year and have $70,000 in my 401(k). It hasn’t been managed since then because I don’t know what to do with it. Sadly, it depreciated a significant amount recently.
  • I have $200,000 I am thinking of using to buy a business, such as an existing one or franchise. However, are there better options to grow my money either for the short term (while everything is on furlough) or for the long term?

Thank you for your expert advice.

— Erwin A.

James Royal, senior investing and wealth management reporter: “As you assess your future directions, you’ll want to consider a few alternatives. While being your own boss may sound like a dream, it comes with increased risks, too. Small businesses are notoriously risky, with a high failure rate. However, if you have the right skills and expertise, you can make a go of it. But you ought to at least consider the value of diversification. If you use your cash to invest in a business, then your whole financial life revolves around the success of that business. If it fails, not only are you out of a job, you may deplete your whole savings in the process.

However, if you find another job and invest your money in a diversified portfolio including stocks, you have two potential sources of wealth creation. A well-diversified portfolio of stocks, such as an index fund based on the SP 500 index, should grow over time. Historically, the SP 500 has grown about 10 percent annually over long periods, but with significant volatility in the interim. While this is the approach proposed by superinvestor Warren Buffett, you must have a long-term mindset to invest in stocks and be willing to keep your money in the market for at least five years in order to ride out the volatility.

For short-term money, your best bet is a CD, and an FDIC-backed account will offer you a safe, albeit low, return. It sounds like it could be helpful to meet with a financial adviser to get your financial life in order and figure out where you can go from here. Here are my top tips for doing that.

Q6: Retiring soon. Does it make sense to buy a vacation home?

I’m a fairly healthy, 65-year-old single woman with a fairly stable job. I anticipate working for another two to three years. I’ve recently become debt-free and own my own co-op, which is worth about $700K with no mortgage. I have a six-month emergency fund. I have a 401(k) worth a little more than $1.8M and an IRA worth about $240K.

I would love to buy a vacation home. I love the idea of a house, but I’m a single woman who is not handy. I recently saw a property I liked for $425K. Is it financially foolish to take $300K from my 401(k), use $225K for the down payment and use the additional $75K for minor renovations, if necessary? Factoring 3 percent 30-year and 15-year mortgages, plus other monthly housing costs, my monthly housing cost alone would be in the neighborhood of $3,500 to $4,500 a month, about 50 percent of my take-home pay. 

Also if for some reason I am forced to retire earlier, I will not take Social Security until I turn 70 but will live off my 401(k) and a $3,800 a month pension.

Am I being unrealistic?

— Marilyn M.

Answered by Stephen Kates, CFP: “Congratulations on having saved so well and being debt-free. That is a huge accomplishment! However, taking on a mortgage at this stage of your life will put you back into debt and leave you with much less cash flow.  A 15-year mortgage will be paid off when you are 80 years old. This is a potential situation that you should weigh carefully. Before we break down your current cash flow and investments, it’s worth thinking about if you want to commit to a debt payment in retirement. Without knowing all of your current and future expenses, it’s hard to predict whether you can comfortably accommodate these additional expenses. Sustainable cash flow will be your new paycheck once you are retired and the higher your expenses the more of your paycheck will be spoken for.

Based on what we do know, the first consideration will be the withdrawal of $300K itself. For an after-tax lump sum of that size, you would need to withdraw approximately $460K to account for 35 percent federal taxes (more if you live in a state with its own income tax). Any withdrawal you take from your retirement account will be viewed as ordinary income by the IRS and therefore push you into a much higher tax bracket. By withdrawing that much from your investments, you would be depleting your investments by close to 25 percent and paying a lot in taxes. While your investments may still grow between now and retirement, it’s not a guarantee that you would make up that amount before retirement.

Second, it’s important to think about your cash flow needs. Your current balance minus the down payment ($2,040,000 – $460,000) would leave you with $1,580,000 in investments.  Assuming a normal 4 percent withdrawal rate in retirement, you could expect to withdraw $5,260 pretax, or $4,000 after tax. Accounting for an expected $2,100 in Social Security, and your pension, this totals roughly $9,000 in monthly income after tax. Based on the estimated housing expenses you predict, you would still be using 50 percent of your take-home income.  This is a high amount to be dedicating toward housing, especially in retirement. Keeping your housing expenses under 30 percent would be a more prudent level.

If you are committed to a vacation home, is there a way to lessen your housing costs though rental income or selling your co-op for a smaller primary residence? This could put you in a more stable position to balance two homes.

Having said all of this, my suggestion is that you take stock of all of your income, assets and expenses and work with a financial adviser who can do a proper assessment of your situation.  You have done an excellent job saving and have a very solid situation but owning both your co-op, and a second home could leave you in a tight cash-flow situation.”

Voya Offers SAVVI’s Short-Term Financial Planning Tool

Voya Financial is collaborating with SAVVI Financial, a technology-enabled financial wellness platform, to offer a COVID Relief Planning Assistant designed to help those who have been laid off, furloughed or had their working reduced hours because of the pandemic.

Through its Retirement and Employee Benefits businesses, Voya will offer SAVVI Financial’s COVID Relief Planning Assistant to its workplace clients as an online resource for their plan participants and employees.

“The relief tool helps people make the right choice across a series of goals holistically rather than with one particular product or solution,” Andrew Frend, senior vice president of Product and Strategy for Voya’s Employee Benefits business, tells PLANSPONSOR. “It is uniquely capable of addressing the challenge of choice overload and helping people figure out the right thing to do.”

The COVID Relief Planning Assistant is a targeted experience for those financially impacted by the pandemic who need a short-term plan. If an individual has lost his income or had his income reduced, the solution provides educational resources or an action plan that adjusts his household financial plan by organizing assets, debt, expenses and existing income to create a strategy to help the individual get through the next three to six months.

To begin, individuals will be provided with a link to this online tool by their employer or retirement plan sponsor. They will then be guided through a series of six questions which will gauge how they’re feeling about their overall financial situation, collect key financial household information, determine whether their health care coverage has changed during the crisis and collect other necessary financial and employer information.

If they qualify for COVID-19 relief planning assistance, they will then receive a personalized, short-term financial action plan. It will provide specific guidance on recommended monthly spending cuts and budget changes, specific accounts (savings, health savings accounts [HSAs], retirement, etc.) to access for income shortfalls and potential savings actions to meet longer-term retirement goals. The recommended actions also take into account Coronavirus Aid, Relief and Economic Security (CARES) Act benefits, tax consequences and long-term retirement goals. If a person does not qualify, they will then be directed to educational resources selected by SAVVI.

“This COVID Relief Planning Assistant is a valuable tool to help those financially impacted create a personalized, short-term plan to help manage through their immediate financial needs—without compromising their future financial goals,” says Rob Grubka, president, Voya Employee Benefits.

Best Ways to Save Money While on Your Own

While living with parents or family is nice, it can get old after a while. People need their independence; however, living on your own can be daunting especially if you’re young and don’t have much money. In this case, here are some of the best ways to save money while on your own. You’ll become more responsible with your money with these slight changes in your life.

Create a Savings Account

The first step to saving like an adult is to create a savings account. Assuming you have a steady income, savings accounts store money and earn interest. These are federally insured accounts, so if the bank fails it can cover up to $250,000. Savings accounts can help you grow your money. Strong annual percentage yields (APYs) typically offer low initial deposit requirements and low monthly maintenance fees while paying back your money with slight interest. Importantly, savings accounts are not quick cash deposits like checking accounts. You have limited accessibility for emergencies or large expenses.

Use Credit Cards Wisely

Of course, just because you have money in the bank doesn’t mean you should spend it frivolously. Use bank cards responsibly, especially if it’s a credit card. Credit cards are risky because, when used improperly, they can rack up long-term debt. Banks use credit cards as a trust-system in which the bank pays for the card statement with the trust that you’ll pay back the debt in a monthly or circulatory billing cycle. While many people can do this responsibly, you must know your limits. Extreme credit card debt can ruin your credit which affects your mortgage, housing, and even your job.

Buy Used

Likewise, buy used items whenever possible. One of the best ways to save money while on your own is through used goods. Most people scoff at the idea of buying someone else’s belongings, but many stores have made it easier to do so. These stores offer high-end products at a fraction of their original cost. Similarly, consider used goods for first-time major purchases too. Specifically, consider used appliances (if they’re still functional), used electronics (slightly outdated ones work fine), and used cars. Your first car on your own doesn’t need to be a luxury vehicle. In fact, look around and negotiate until you find the right used car for your budget and lifestyle; if you need pointers, follow these handy tips for buying your first car.

Prioritize Needs Over Wants

Finally, prioritize your needs over wants. While it’s healthy to treat yourself to a nice meal or fun activity, save these for special occasions. When saving money, you need to consider all necessary and unnecessary expenses. Monthly rent and utilities naturally fall under necessary expenses. However, you can reduce weekly nights out or buying new entertainment to save more money. That’s not to say you must eliminate these from your life completely; just be smarter about how often you afford these small luxuries.

Steven Merrell, Financial Planning: Finding the right fund (part 3)

This is the third and final installment in my “finding the right fund’ series. In the past two installments, I discussed the importance of good information sources when researching mutual funds. I also shared some of the key metrics I use when evaluating a fund. This week I will show you how to pull it all together using two actual funds: Vanguard’s Total Stock Market Index fund and the Lazard Global Listed Infrastructure Fund.

Before we get into the details, please keep in mind that this is not an investment recommendation. I personally invest in both of these funds, but they may not be appropriate for you given your unique situation.

Let’s start with the fund prospectuses. Reading the prospectuses reveals that both funds have multiple share classes. The Lazard fund has three: Institutional shares (GLIFX), open shares (GLFOX) and retirement plan shares (RLGLX). The Vanguard fund has two share classes: Investor shares (VTSMX) and Admiral shares (VTSAX). The only real difference between the share classes is their cost.

The Lazard institutional shares (GLIFX) catch my eye because they have a much lower expense ratio than the open shares (0.96% vs. 1.21%)—the difference being the presence of a 0.25% 12b-1 fee on the open shares. Digging deeper into the prospectus, I discover that GLIFIX requires a minimum investment of $10,000, while open shares require an investment of only $2,500.

The Vanguard Admiral shares (VTSAX) also catch my eye because they have an expense ratio of 0.04% compared to 0.14% for the investor share class. VTSAX requires a minimum investment of $3,000, while investor shares can be purchased with an investment of $1 or more.

According to the prospectus, GLIFX invests primarily in stocks with a minimum market capitalization of $250 million.  At least 80% of its equity investments will be in utilities, pipelines, toll roads, airports, railroads, ports, telecommunications and other infrastructure companies. I further learn that the manager seeks to hedge a substantial portion of the fund’s foreign currency exposure.

From the Lazard website, I download a copy of the fund’s holdings as of March 31. The portfolio has only 26 investments and all but six are located outside of the United States. I also learn that the fund has 18 percent of its value invested in a short-term money market fund. I can see this is a highly concentrated, actively managed portfolio.

VTSAX, on the other hand, is a passively managed index fund that seeks to deliver returns in line with the overall U.S. stock market. I download its holdings also—all 3,513 stocks—and find nothing to surprise me. Both funds invest in securities that I understand and feel comfortable holding.

We next turn to Morningstar to gain deeper insight into the metrics of each portfolio. For example, GLIFX’s expense ratio of 0.96 percent is high compared to the 0.04 percent ratio for VTSAX. However, Morningstar shows that GLIFX is just about average when compared with other specialty funds. That doesn’t make it a bargain, but at least we know we aren’t way off the market when compared with other funds. VTSAX, on the other hand, is cheap compared to its peers. The average expense ratio for a U.S. large-cap institutional fund is 0.72 percent, almost 20 times higher than VTSAX.

We look at performance and see that GLIFX has consistently performed in the top quartile of its peer group. However, because it owns only 26 stocks, it is high risk and any investment we make in GLIFX must be small—no more than 10 percent of the overall portfolio.

Comparing the upside/downside capture ratios reveals each fund’s price risk. VTSAX has an upside capture ratio of 101 and a downside capture ratio of 105, meaning it is slightly more sensitive to downside moves in the market. With upside/downside capture ratios of 49 and 45 respectively, GLIFX is much less sensitive to market moves overall but has slightly more upside sensitivity.

So, which is the right fund? The answer depends on what you are trying to accomplish in your portfolio. The right fund for you will be the fund that invests in securities you can understand, delivers acceptable returns at a risk level that is consistent with your goals. And, of course, the right fund will do all this with a low expense ratio.

Steven C. Merrell is an investment adviser and partner at Monterey Private Wealth Inc., in Monterey. Send questions concerning investing, taxes, retirement or estate planning to Steve Merrell, 2340 Garden Road Suite 202, Monterey 93940 or smerrell@montereypw.com.

AICPA PFP Conference at ENGAGE 2020 Focuses on Financial Planning During COVID-19

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More Married Women Want to Take Bigger Part in Household Financial Planning, Survey Shows


Syda Productions/Dreamstime

An increasing number of married women say they are interested in taking a bigger role in their families’ long-term financial planning, a welcome dynamic as the coronavirus pandemic underscores their particular vulnerabilities.

In a
UBS
survey of almost 3,000 women and men across the country who have substantial investment assets, 64% of married women say they have a greater interest in discussing financial planning with their spouse due to Covid-19. Similarly, 63% said the crisis has affected how they think about money, and 51% said they intend to discuss their inheritance plans with their children because of the virus.

To produce its “Own Your Worth 2020” report, UBS surveyed 906 women and 919 men from Jan. 8 to Feb. 28. The report also includes data from 50 women in same-sex marriages and from a March 2019 UBS survey of 883 single men and women who invest.

Retirement

Barron’s brings retirement planning and advice to you in a weekly wrap-up of our articles about preparing for life after work.


UBS began researching U.S. women’s views on financial planning in 2018, citing research that shows that eight out of 10 women will end up solely responsible for their financial well-being late in life. The two main reasons are that women typically live longer than men and divorces among those ages 50 and older are becoming more common, UBS said in its report.

“The consistent message that we need to get across with couples is that long-term financial planning is just not something that can be delegated,” said Liz Sheehan, a financial advisor at UBS’s wealth-management arm. “You both have to be sitting at the same table for that conversation.”

When women don’t take part in financial planning and then lose a spouse, they often find out that they aren’t as prepared for retirement as they thought, or that their asset allocation is inappropriate for their level of risk tolerance, she said.

The survey shows there is still a way to go between women’s interest in being involved in financial planning and getting them more involved: 49% said they let their spouse take the lead in financial planning, while 35% said they participate equally.

The women who defer to their spouses cite a variety of reasons, with 67% saying their spouse knows more about investing, 60% saying they are too busy with other responsibilities, 59% saying they like not having to worry about financial decisions, and 36% saying the couple’s money feels more like their spouse’s money.

“A lot of that comes down to confidence, not competence,” said Carey Shuffman, head of women’s segment strategy for UBS. “This is not a capability issue between the genders. Many women are more than equipped to take an active role and make these decisions.”


The consistent message that we need to get across with couples is that long-term financial planning is just not something that can be delegated.


— Liz Sheehan, UBS financial advisor

One surprising finding in the survey: Shuffman said that in each of the past three years, the survey has found that married millennial women are more likely than baby boomers to let their spouses take the lead in financial planning. In the 2020 survey, 54% of millennial women said they defer to their spouses, compared with 39% of baby boomers.

Those figures diverge from expectations before marriage, when most single millennial women say they expect to play an equal role in financial planning if they get married. The survey found that 88% want to participate equally or take the lead, and 67% believe that married women rely too much on spouses to make financial decisions.

“Our research again points to the fact that millennials are actually perpetuating the status quo rather than breaking it,” Shuffman said. “This is where the research really shows that intentions and actions are not aligned.…Something sort of happens between single millennial women’s intentions and then the actions that they actually take when they become part of a couple.”

Shuffman suggests couples have monthly meetings at home to discuss budgeting, cash flow, long-term planning, and strategies for dealing with potential adversity, such as one spouse losing a job, falling ill or dying.

“We found that when couples do share in the financial decisions equally, they report greater satisfaction and arguing less about money and feeling more confident in their financial future,” she said.

Write to us at retirement@barrons.com

Financial planning guides for graduates during COVID-19

At the start of 2020, the U.S. economy was generally healthy, with record low unemployment and strong consumer confidence. But amid the COVID-19 pandemic and ongoing uncertainty, unemployment soared, the economy slowed and consumer confidence declined sharply.

Even as the economy slowly begins to restart, new graduates will likely have a particularly challenging time finding jobs this year. That doesn’t mean that it is impossible – but they will need to be smart about the searches and have a few other plans in place.

For those who have loved ones in the class of 2020, we’ve gathered a few tips to share with the graduate:

Be aggressive when it comes to job searching. Looking for a new job is hard, even under the best of circumstances. While your grad may have a lot of talent to offer, the competition will be extra fierce. When looking, they shouldn’t just think about their majors when considering who might hire want to hire them. They should think of all the skills and experiences they have to offer an employer and pursue roles that match. Remind them that their job search could take weeks or months – likely longer than usual in this environment. They can use that time to update their resumes, build up experience through internships and part-time jobs, and network at every opportunity.

Be conservative with spending. First things first – work with your grad to create a budget if they don’t already have one. Help them prioritize and decide where they can cut expenses: cheaper phone plan? Unneeded subscriptions? Lay it all out and make some decisions. Guide them to stop using any credit cards they may have, and try to pay more than the minimum to pay off the balance faster and make it easier to save.

Sign up for health insurance. Not getting sick or injured is not a good health plan – they shouldn’t take any unnecessary chances with their health, especially in this environment. The good news is, as a new graduate, an adult child can stay under a parent’s plan – even living in a different location – up until age 26. If that isn’t an option, there are healthcare plans through www.healthcare.gov that they can explore if they don’t have coverage through a job. Note that individual or short-term, limited-duration health insurance plans could be cheaper in the short run but can be extremely costly over the long run if the holders do get sick.

Know the rules of student loans. For most federal student loan types, after graduating or leaving school, your grad has a six-month grace period (sometimes nine months for Perkins Loans) before payments are due. Because of COVID-19, the U.S. Department of Education is now suspending payments on most federal student loans from March 13, 2020 through Wednesday, Sept. 30. No interest or penalties will accrue on loans during this time. Normally, for most loans, interest still accrues during any grace period. After Sept. 30, this payment suspension and interest waiver will end.

That said, if your grad is able to make payments during this period, they should. If they can afford it, the payments they make will go toward the principal balance, reducing the total amount they pay and helping pay off the loan faster. But, be sure to encourage them to check with their lender.

If your grad was fortunate enough to have secured a job and have a steady income, make sure they are prioritizing saving for their future. If their company’s retirement plan offers a 401(k) match, they should be contributing at least up to the maximum match offered to ensure they aren’t leaving easy money on the table. It is also important that they factor saving for an emergency fund into their budget. This fund should ideally cover three to six months of essential expenses, but any amount they are able to set aside and save helps. Finally, if possible, they should also consider opening a separate IRA to further safeguard their futures.

We recognize these are uncertain times and the way ahead may look quite different. Don’t be discouraged; instead, exude determination, persistence, energy, enthusiasm and optimism to create a successful path forward.

Mark E. Engberg, CFP, is a Charles Schwab independent branch leader located in Rehoboth Beach. A Delmarva native, Engberg has more than 20 years of experience helping clients achieve their financial goals. For more information, call 302-260-8731 or go to www.schwab.com/rehobothbeach.

8 ways to help pay for college if your financial situation suddenly worsened

Millions of students around the country are getting ready to head back to college this fall.

For some, that means opening up Zoom or Google Meet again. And for others, it means returning back to the campus they abruptly left in the spring due to COVID-19 closures.

Regardless, it’s a different world than we knew before. Unfortunately, millions of Americans’ have lost their jobs as a result of the pandemic, putting many families in a dramatically different financial situation than before.

This unexpected hardship is causing many families to reconsider their higher education options as college costs are becoming increasingly hard to afford.

If you are facing financial difficulties and struggling with returning to school, here are eight ways to help get the situation back under control.

1. Appeal your FAFSA application

The FAFSA application reflects your family’s financial situation from the tax year two years prior, so the aid you were originally awarded might not fit your current financial situation. If that’s the case, you will likely want to appeal your application to have your aid adjusted.

To do this, make sure you update your FAFSA application to accurately reflect your current financial situation. After that, you will need to contact the school you plan to attend to further discuss the special circumstances that are affecting your family’s ability to pay.

This may require writing an appeal letter and providing documentation to support your appeal. This could be a letter of unemployment or a medical bill. Ultimately, the decision is up to your school and cannot be appealed to the Education Department.

Currently, the U.S. The Department of Education has suspended all federal student loan payments until Sept. 30, 2020 under the CARES Act. Additionally, the deadline for federal FAFSA applications for the 2020-2021 school year has been extended until June 30, 2021. However, deadlines vary between states and colleges.

2. Ask your college for a tuition reduction 

The Wall Street Journal recently reported that the easiest way to get a tuition reduction is to just ask.

It may sound too good to be true, but given the current situation with COVID-19 forcing many classes to move online, students have more leverage than ever before when it comes to negotiating tuition.

In fact, nearly 60 colleges and counting have been hit with lawsuits from students who are demanding tuition refunds, according to Newsweek. The argument is that students did not receive the in-person college experience that they had signed on for, therefore the value of the education was not worth the original agreement.

Some universities have listened and have since offered partial reimbursement. Going into the new school year, however, there is still a lot of uncertainty and controversy around tuition. For instance, Harvard recently announced that it would be adopting virtual learning for the 2020-2021 school year without a tuition reduction. Meanwhile, the University of Michigan and Cornell actually increased its tuition, angering many students and their families. However, there are some schools, like Williams College, that will offer reduced tuition and other schools are offering the option to defer payment for a year, like Davidson College in North Carolina.

Moral of the story: You never know until you ask.

3. Apply for late-deadline scholarships

Typically, scholarships have already come and gone at this point in the summer. However, the 2020 situation is much different than years past and many students have been met with new financial situations in just a few short months — leading many organizations to extend scholarship deadlines.

“Don’t think of the scholarship search time as being over,” James W. Lewis, President of the National Society of High School Scholars told U.S. News. “In my mind, the scholarship search has just begun. The old norm was that scholarships are over by now, but this is a new reality, and institutions are having to rethink everything. Part of that is financial aid and scholarships.”

A good place to start is by searching the U.S. Department of Labor’s free scholarship search tool. Experts also suggest looking for local scholarship opportunities as these are often less competitive than the national ones.

4. Look into community colleges

Currently, 9 percent of colleges in the U.S. are planning for an online school year and 24 percent are proposing a hybrid model according to a survey by the Chronicle of Higher Education. However, many of these schools are also planning to keep the tuition rate the same despite the major differences in online versus traditional instruction.

This is forcing many students and their families to make the tough decision of whether or not it’s worth it to go back to school in the fall.  Not only is safety a concern, but there’s also clearly a difference in the type of learning and experiences one gets from virtual learning.

If you’re someone who’s finding the idea of staying home to study more and more appealing, you may want to consider taking courses at your community college. This could be a great money-saving option for those who have general education courses to get out of the way. Before making any decision, however, be sure to double-check that the credit will transfer.

5. Apply for a credit card to help pay for needs 

Credit cards can be very helpful in tough situations like this when managed responsibly. If you are struggling coming up with money for the necessities like books and food, a credit card could really help out.

There are two types of credit cards that you’ll want to consider. The first is a cash back card that will reward you for your spending and put a little extra cash in your pocket. However, you will not receive that cash back until you pay the bill, so if that’s not possible, then this isn’t a good idea for you.

The second option would be to look for a card that offers an introductory zero percent APR. A zero interest card can help you avoid paying sky-high interest rates on purchases and balance transfers, for up to a year or even longer. It can also help you avoid applying for a loan that may carry a high interest. This gives you a nice cushion to pay off the debt, while also allowing you to still pursue your education. A word of caution, however, is that once this introductory period is over, APRs can easily run over 20 percent. Therefore, it’s very important to manage your balance carefully. Otherwise, you may end up paying more in interest than you would have on a loan.

Note that you may not have the credit score eligible for a card like this, which means you may want to ask your parents if they can apply and add you as an authorized user.

6. Look for a part-time job or side hustle

A part-time job or side hustle can help you pay for everyday expenses or if you’re good there, you can put it towards your tuition and books.

Many colleges offer work-study programs as a form of financial aid, but it largely depends on when you apply, your level of financial need and your school’s funding level. Typically, students are paid directly, however, you can also request that your paycheck go directly towards tuition.

If you do not qualify for a work-study program, look locally to see if you can find something else that allows you enough flexibility to keep up with your schoolwork.

Some other ideas to consider are tutoring (especially if you have expertise in a subject), gig work, selling artwork online if you’re a creative type or maybe you have clothes and furniture you don’t have a need for that you could sell.

7. Check for tax deductions

Before you file your taxes this year, double check that you’ve filed for education-related tax credits and deductions. One option is the American Opportunity Tax Credit (AOTC), which allows individuals to claim up to $2,500 in tax credit on expenses related to tuition and fees for up to four years.

In order to qualify, you must:

  • Have $2,000 of eligible spend on tuition, books, equipment and school fees.
  • Be an undergraduate student.

The amount will also vary depending on you or your parents adjusted gross income. For example, if your parents claim you as a dependent and made $80,000 or less ($160,000 or less when filed jointly) then you will get the full credit. Anything more than that and you will only receive partial credit.

Another tax credit to look into is the Lifetime Learning Credit (LLC), which allows you to claim 20 percent of the first $10,000 paid towards tuition and fees for a maximum of $2,000.

Unlike the AOTC, the LLC is available for undergraduates, graduates and non-degree or vocational students. Additionally, there’s no limit on the number of years you can claim it.

You are eligible for the credit if you or your parents made less than $58,000 ($116,000 when filed jointly) in the last year. If your income was between $58,000 and $68,000 ($116,000 and $136,000 combined) then you can get a reduced credit. However, you can not get a credit if your income was above $68,000 ($136,000 when filed jointly).

One caveat, however, is that you cannot claim both the AOTC and the LLC in the same year.

8. Apply for a student loan

If you are a dependent undergraduate and cannot afford full tuition, your parents can apply for a Direct PLUS loan. Applicants can borrow up to the full cost of attendance, less other financial aid, and the interest rate for 2020–21 is 5.3 percent.

However, if your parents are not willing to do that and you’ve maxed out your federal loans and financial aid still doesn’t cover your tuition, you may have to consider a private student loan. However, before borrowing from a private lender, it’s important to understand what you’re getting into. 

Like everything else, there are pros and cons to private loans. One of the biggest perks is that private lenders typically lend larger amounts, which could be good news for you. However, these loans are not eligible for any sort of government loan forgiveness or repayment plan.

Bottom line: If you need to borrow money and have maximized your federal student loans, then private loans can help you get through school. Just be sure to do your research and shop around.

Learn more:

Featured photo by Tom Werner of Getty Images.

How a Ruling on Gay and Transgender Rights May Help the Climate

The world is still a patchwork of different rules and restrictions, but many places are getting back to work. In New York City, for example, hundreds of thousands of people returned to their jobs this month as the city implemented the first two phases of its reopening plan.

Across Britain, thousands of workers unable to work from home, in construction and manufacturing industries, have already returned to work after the country eased lockdown restrictions in May. Many more will be returning to work July 4, as pubs, restaurants, hotels and museums reopen.

All this requires energy to keep the lights on and the machines running. And that energy means greenhouse gas emissions.

We saw a sharp drop in those emissions when large parts of the world were locked down to fight the coronavirus pandemic, though they are now rebounding. In early April, global emissions were 17 percent below 2019 levels, but by early this month they were roughly 5 percent under last year’s levels.

That’s not enough to solve global warming. So, when we head back to the office, how can we change habits and work culture to help keep emissions down?

[If you’re already signed up for the Climate Fwd: newsletter, thanks! Want to follow The New York Times climate team on Twitter, too?]

In the United States, commercial buildings account for nearly 40 percent of national energy use. If that energy comes from burning fossil fuels like coal, it very likely produces a lot of greenhouse gas. So changing work habits can make a difference.