Student Loan Debt - Pay off vs Seek Loan Forgiveness

One late evening, we received a call from Mr. Booker who owes more than $200k in student loans for a degree that has a beginning pay of $55k. He recently got married and has a child who is 6 months old. He is struggling to keep up with all the payments, and listened to an "expert" suggestion to wait for 10 years and then apply for loan forgiveness. It sounded too good to be true, and so he wanted to know our perspective. This situation should sound strange, but unfortunately this is the current norm with young families. Student loan debt in this country has crossed over a trillion dollars, and is affecting the younger generation in more ways than they think. On top of that, many parents have co-signed on their children's student loans and are in danger of losing their hard-earned retirement.

A lack of understanding of debt forgiveness and repayment options are affecting many youngsters in making the right decision. Here are the guidelines that you can follow:

Step 1: Identify Student Loan Details

The first step is to identify whether the loan is issued by the Federal government or through private sources such as a bank or financial institution. If it is from a bank, the interest rates are generally lower. If it's from private sources, you're likely have high interest rates.

If your interest rates are high, we recommend you to shop around for a better rate, and refinance. There are several agents like LendEDU or Nerd Wallet. You need to know the terms and conditions (remaining amount, interest rates, payment options etc) before you start the process.

Step 2: Identify whether you qualify for Federal Student Loan Forgiveness Program

Federal Student Loan Forgiveness, Cancellation and Discharge Program is an initiative that President Obama approved while he was in office. In order to qualify for forgiveness, cancellation or discharge program, there are strict guidelines that mandate the forgiveness. Some of them are:

a) Closed School Discharge

b) Public Service Loan Forgiveness

c) Teacher Loan Forgiveness

d) Perkins Loan Cancellation and Discharge

e) Discharge Due to Death

f) Borrower Defense Discharge

There are pros and cons for each category and we recommend that you contact Mayanah Coaches ASAP for your next steps.

Step 3: Identify Repayment Options

There are several ways student loans can be repaid. Common options are:

a) Standard Repayment Plan - Best Option

b) Graduated Repayment Plan

c) Extended Repayment Plan

d) Pay As You Earn (PAYE) Repayment Plan

e) Income Based Repayment (IBR) Plan

f) Income Contingent Repayment (ICR) Plan

g) Income Sensitive Repayment Plan

At Mayanah Financial Coaching, we recommend our clients to pay off the student loan by budgeting a set amount every month. We do not recommend aiming for Student Loan Forgiveness or Cancellation as the prime path for following reasons:

1) Government can change its rules at any time and relying on them for personal finance is never a good idea.

2) 10 years is a long time and it forces you to work for government with a lower salary, thereby taking away your choice and potential to earn and save for retirement.

3) Student Loans in most cases cannot be removed via bankruptcy and so any major incident in fe will keep you a debtor forever.

Contact us and let us help you to put together a plan so that you can be debt-free and live a life of your choice.

Identity Theft - What you should know?

Recently we received a call from an 82 year old gentleman that made me cringe. He and his wife  had worked hard during their younger years, and then had retired, in their mid 60s, to lead the life of their dreams. A few months ago, he became a victim of identity theft and lost almost everything. The associated stress almost killed him, and today he is trying to recover the damage. It is no surprise that the Bureau of Justice estimates that approximately 17.6 million people, or about 7 percent of U.S. residents age 16 or older, were victims of at least one incident of identity theft in 2014. The rate of yearly increase in identity theft is alarming, and chances are that you too will be a victim at one point in your life if you do not take protection right now.

So, what is identity theft? The Department of Justice defines identity theft and identity fraud as any type of crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain.

Here are some of the common identity theft situations. You can learn more HERE

Here are some of the ways you can be proactive in preventing identity theft:

1) Review Credit Reports:

There are 3 credit report agencies in US - Experian, Transunion and Equifax. You need to review all three credit reports annually to make sure that there are no falsified information under your name and social security number. There are several companies offering you the service. But, at Mayanah, we recommend to get the reports FREE through Federal Trade Commission website.

2) Report Fraudulent Activities:

If you become a victim of identity theft, the next step is to immediately report it  and start the recovery plan. Please note that it takes an average of 200 hours and six months to recover from identity theft..

3) Prevent Identity Theft:

The best scenario is to prevent identity theft before it happens. This will save a lot of time and heart-ache for you and your family. There are several agencies such as Credit Karma that provide Credit Monitoring Services. However, at Mayanah, we recommend you availing Credit Monitoring and Restoration Services. Based on our experience, we highly recommend Zanders Insurance because of their low fees and 100% recovery success rate.

If you would like to learn more about preventing online identity theft, please visit PixelPrivacy.com.

Remember that, if your identity is stolen, you are the only one responsible to fix it without a restoration service. Please feel free to contact us for more information or if you need help in reducing your debt and building your wealth.

Are you making these big 401(k) /403(b) mistakes?

The terms 401(k) and 403(b) are thrown around often, and most people have no idea what that means. It is simply a retirement savings plan that is sponsored by an employer with the terminology derived from the IRS tax code. Most organizations have replaced their pension plans with the 401(k)/403(b) plans and provides some sort of matching contribution. Here are some of the biggest mistakes that we make when it comes to 401(k)/403(b):

1) Not contributing at all:

Forbes reports that 68% of Americans do not contribute to any Employer Sponsored Plans. This may be because they are not offered a plan or they decide to not be a part of it. 

If it is the former reason, you are not at fault. Even then, you need to invest in an IRA or even better, in a Roth IRA.

If you are offered an Employer Sponsored Plan, by not contributing, you are throwing money away. Most companies offer a 3-4% match either on a 1:1 ratio or on a 2:1 ratio. This accumulates to hundreds of thousands of dollars by the time you retire.

2) Cashing Out Early:

When life happens and an emergency strikes, it's natural to eye the big amount invested in your retirement fund. Having an emergency fund is what helps at this point. By cashing out early, you are not only destroying your retirement, but you end up paying additional taxes and penalties, which is usually 10%.

The cash out usually happens when a person changes his/her job. It is prudent to take money out of the old employer, but instead of cashing out, it should be invested in an IRA or a Roth IRA. You need to seek guidance, if you are in this category.

3) Taking a loan against 401(k)/403(b):

The usual explanation for taking a loan against your retirement fund is that it is one's own money and one plans to repay it over time. However, financial coaches are against it for variety of reasons. Once a loan is taken, you have a set number of days to start repaying them. If you cannot do it for any reason, it will be considered a distribution and you will have to pay additional taxes and penalty of ~10%. 

If you lose your job at the time of a pending loan on your 401(k), you need to immediately pay it back or it will be considered as a hardship withdrawal, leading to taxes and penalties.

The biggest setback is in your retirement growth as the loaned amount will miss out on the compound interest - the eighth wonder of the world.

4) Settling with Default Contribution:

Dave Ramsey recommends that we save 15% of our income for retirement. However, most companies' default contribution level is at 4-5%, which is the maximum for company match. If not careful, we will miss out on contributing more and losing the compound interest that we could have earned during the working years.

5) Avoiding Risk Completely:

Many employees do not have financial knowledge and might be scared of market behavior. So,the natural tendency is to invest in bonds and treasury funds. However, this may not be the right strategy, depending on your age. The best recommendation is to contact a financial coach and get guidance.

6) Failing to Research Investment Funds:

Again, due to lack of financial knowledge, many employees will choose funds recommended by their friends and family members. Even though this is better than not contributing at all, the chosen funds may not be the right one for you depending on your age and family situation. In addition, many companies entertain Target Retirement Funds, which in reality is a blended fund. It is always better to research each fund thoroughly before investing your hard earned money. Your Coaches at Mayanah are certified by Dave Ramsey to provide solid financial advice.

7) Not making catch up contribution

Depending on your financial status, you may need to accelerate your contribution after the age of 50. The good news is that IRS allows for catch up contribution. However, if you are not careful and aware, you will miss out on these added perks.

At any stage, it is better to have a financial coach to guide you through and Mayanah Coaches are here to help you succeed !! 

How to STOP Unwanted Catalogs, Junk Mails and Telemarketers

Red Crow Marketing reports that an average person will be exposed to more than 4000 to 5000 advertisements a day. All major corporations have extensive marketing and ad generation groups within their organization, and their aim is YOU and YOUR attention. They want YOU to buy their products, even if you don't need it or much worse, even if you are in deep debt.

Now, it affects you in multiple ways:

1) Identity theft is a major issue right now, and pre-approved credit cards falling  into the wrong hands increases the chance of your identity being stolen.

2) Our eyes are enticed and we tend to buy more when we go through a catalog - atleast we believe it boosts our happiness. The end result could be that we get into more debt.

So, here are the ways to stop these catalogs, mails and telemarketers.

Telemarketers:

By listing your number in the National Do Not Call Registry, unwanted telemarketing calls can be reduced greatly. You can do that by calling 888-382-1222 or through the Federal Trade Commission website.

Credit and Insurance Offers:

You can and must opt out by calling 888-567-8688 or through the Credit Agency.

Junk Mail:

All junk mails can be eliminated by visiting the Data and Management Association. It will take 30 to 90 days for your opt-out to be in effect. Once you are eliminated, then contact Epsilon to request that you be removed from their marketing database. Be sure to include your name and mailing information in the e-mail.

If you want to use mobile app to control the catalogs you can receive, you need to use Mail Stop Mobile App or Paper Karma 

Email Marketing:

Please make sure that you DO NOT give out your address or email to stores because once it's given, it is difficult to control the flow of catalogs as some of them sell your information to third party ad agencies.

The keys to success are to have a solid budget and to stay within the budget. Mayanah Coaches are specialists in helping you stay on track. Contact them today !!

Marathon vs Personal Finance - 5 Proven Similarities

Running a half-marathon had always been on my bucket list. However, to start the process I had to register at Run Houston, and create a group for accountability. The very thought of running a 10k had seemed daunting. However, after 4 months of training, and support from family and friends, I crossed the finish line in 61 minutes. Now, this may seem to be inconsequential to most of you. but, for a person who once weighed 225 pounds and struggled to climb stairs - this was a monumental start. In the process of training, I learned several lessons and surprisingly all these lessons can be applied to our daily finances..

1) It's all about the finish line

When we had started training, our group had 20+ people. But on race day, only 11 people crossed the finish line. I cannot find fault with the other 9 because their intentions were good. However, they had nothing to show at the end.

Millions of people will make New Year's resolutions. And some of them will have achieving financial goals as one of them. But Forbes study shows that only 8% will accomplish their resolutions. It doesn't matter how and when you start building your budgets and investment plan. It's all about what one has to show at the end of the year, and more importantly, during the retirement years. Your friends at Mayanah can help you attain those financial goals.

2) You define success

I like marathons because you are competing against yourselves. I set a time of 62 minutes to complete my run, but I wanted to finish in less than that time. Personal finance is likewise. You set your financial goals and then work your way to attain the goals, or better still, beat them. If you don't know yet, please take a moment to find your RIQ (Retirement Quotient)

3) It is not a sprint

During one of my training sessions, my son decided to join me, and he outpaced me in the first half mile. However, he soon became tired and stopped his run. He didn't realize that winning is not by sprinting, but by running at a constant pace over a long period of time.

This is applicable to personal finance as well. The media glorifies overnight success stories. However, the truth is that well over 80% of millionaires in this country have worked quite a few decades to become millionaires. We at Mayanah can help you pace yourself to accomplish your financial goals..

4) Accountability is critical

Our training group met every Saturday and encouraged each other through out the training period. Social media and certain running apps also helped to keep us focused on our end goal.

Regarding personal finance, when was the last time you checked your portfolio and compared it against market conditions? When was the last time you challenged yourself to cut a few unnecessary expenses from your budget and contribute to your child's education? Well, you need a third eye to guide you! And, good coaching helps you!

5) Break is brutal

Thanksgiving was a few weeks prior to the race, and it was quite natural that the focus was not on the race, but on celebrating one of the greatest holidays (and Black Friday shopping too !!) However, it destroyed the momentum and so we had to work hard to get back on track.

Personal finance is 20% knowledge and 80% behavior, according to Dave Ramsey. It's practically impossible to win with money if we are not self disciplined. However, a coach can guide and keep you on track when the distractions come. Let your friends at Mayanah help you.

It's Okay... You will Survive this Holiday

It's no secret that holiday season has become more consumerist than ever. These days holiday lights are up, and Santa is in stores from October on. We start to hear about family vacations, Christmas dinners and New Year Eve plans beginning September . Kids start giving their 'want' list which includes most of what they hear and see on television. But, what if we are on a tight budget, or we are financially struggling to make it one day at a time. Do we plunge into more debt trying to keep up with the Joneses, and to satisfy everybody else' wants, or do we take a stand to make a decision for ourselves?

It's a personal choice, but it's prudent to take a stand for yourselves so that you don't look back at the holidays as a nightmare, but look forward to every year's holiday season. Here are a few ways to handle the most common challenges during holidays, on a budget:

Gifts: 

Giving gifts is an integral part of holiday season. There are two approaches we can take. 

One is to limit gifts to immediate family (spouse, kids and parents) and that too by giving just one gift. Research has proved that spending time with family is the best gift you can give. Click HERE for a research based analysis on the most important gifts.

Second is to expand giving gifts to a bigger audience, but limit the amount you will spend on each gift. Click HERE for an excellent gift giving guideline. Once you have identified people, HERE is a list of inexpensive, but useful gifts. Remember, giving gifts should be out of love and not out of duty!!

Holiday Meals and Parties:

Here is a quick question? Name all the dishes you had during the last holiday season? If you are like me, you cannot remember what you ate last week, let alone last year. So, it's not about setting up an expensive table full of dishes. It's about sharing experiences and spending time together. That doesn't mean that holiday dinners and parties should be french fries and chicken nuggets. HERE is a good read on making good meals on a budget.

Holiday Travel:

Traveling costs will escalate during the holiday season and the stress of traveling adds up due to crowded airports and roadways. But, there are lot of ways families can travel without breaking the back. Planning ahead of time, and booking tickets/hotels/cars way in advance, always helps to reduce cost. It's amazing that people travel across the country to see something new, when they have not explored their own city to its fullest. So, if you are tight on budget, decide to explore your city with family. HERE is an ultimate guide to travel when you are on a strict budget.

Decorations:

It's a good time to ask yourselves whether you are competing with everybody in your neighborhood, or if you trying to create memories with your family. Decorations are intended to celebrate holidays and there are several ways we can create our own decorations. HERE are some great examples.

If you are financially struggling or on a tight budget, you still can enjoy the holidays. However, you can also plan ahead so that the future years are the brightest for you. Your friends at Mayanah will help you attain your dreams.

5 Websites that Save YOU Money

Everybody loves a bargain. Don't you?  Especially during holiday season. It can be gotten in several ways. Cutting coupons is one way. Waiting for an item to go on sale is another. However, what if there is an opportunity to identify the lowest available price for a product, or if a coupon is available at your finger tips. Add to it the fact that most retailers match the lowest price. So the key then, is to find the lowest price for the product you want, in your local area. Here are 5 websites/apps to help you during this holiday season.

1) Retail Me Not:

It is a website that aggregates coupon offers and makes them available to consumers. It has almost five hundred thousand coupons of over 50,000 stores in various retail categories like apparel, accessories, automotive, baby and beauty products, furniture, home, garden, pets, toys etc. Their app can be downloaded from the App store and comes in handy in the middle of shopping.

Their website can be accessed HERE

2) Shop Savvy:

It is a mobile application that allows shoppers to scan the bar-code. Once the bar-code is accepted, the app finds local and online prices for the exact product. This allows shoppers to either get a price match at the store, or buy it from the lowest price store. The app is currently available for Android, iOS, Symbian and Windows phones. Their free app can be downloaded HERE

3) Price Grabber:

 This is another website that compares different websites that offers weekly deals and coupons. One advantage of this site is that they have buying guidelines that helps the shopper get the right product and the best value for the price. They have helpful search tools as well as vendor reviews. A con seems to be customer service issues during busy shopping seasons. Their website can be accessed HERE

4) SnipSnap:

 It is a mobile coupon application that allows users to take a photograph of a printed coupon in order to find or create a mobile coupon which can be redeemed at the register. Huge advantage of SnipSnap is that the users can share the coupons among themselves. Retailers are forced to honor these coupons because SnipSnap users can rate the store, thereby affecting the success score rating of the retailer. Since all stores are trying to get a high score, they will accept most of the SnipSnap user coupons. Their app can be downloaded HERE

5) Google Shopping:

 How can we avoid Google these days? Google Shopping is probably the largest and best known comparison shopping engine. It was previously known as Froogle, if you remember the term. It allows users to search for products on online shopping websites and compare prices between different vendors. How can you get there? Just Google it... That's right! Just google 'Google Shopping' and you can get to their website.

If you need further assistance in saving money and being debt free visit our Facebook Page or Contact us.