The Ultimate Guide to SAVE Student Loan Repayment Program – Take Control of Your Debt!

Uncover effective strategies to tackle your student debt through the SAVE student loan repayment plan. Learn about loan qualifications, repayment calculation, and financial tactics to regain control of your debt.

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Is Cash Flow Keeping You Up At Night?

WHAT DO SMALL BUSINESSES AND FAMILIES HAVE IN COMMON?

Apparently, that’s cash flow! I know that standing at our kitchen counter holding the utilities bills, we have that thought; “ugh, I just paid this!” But did you know that it keeps our small business and entrepreneur friends up at night, too? In fact, according to a study conducted by QuickBooks, 69% of small-business owners are up at night fretting over cash flow constraints. Furthermore, they found that 2 in 5 businesses reported having issues and that a third will be unable to pay themselves, their vendors, their loans, and those very near and dear to us, the employees!

WHAT’S HAPPENING AND WHAT CAN WE DO?

For us young, eager, super excited startups and first year businesses, we’re making some beginner mistakes. For one, we’re spending too much too early. It’s so easy to do, right? We’ve all heard that you have spend money to make money, and we all want all those operational tools and shortcuts to bring us success sooner. Second, we have a tendency to overestimate our budgets and forecasts. We tend to be maybe a little overconfident in our process, our sales abilities, and the speed at which we can make receivables and payables match.

Our more experienced business owners struggle for some of the same reasons, like overspending, but their biggest pitfalls come to the concept of timing. Not coordinating actual cash receipts and outflows (or being aware of really when things are moving), not having a cash cushion to allow for slow times (and even more importantly, during times of growth!), and being passive in regards to their accounts receivable while at the same time paying your accounts payable early, all play into very real cash-flow traps.

Here are some suggestions to get all of that under control so your business can live and thrive:

  1. I hate to be repetitive so I’ll double up on this first one; KNOW your numbers inside and out, and secondly, work with a professional. If you’re awesome at what you do, but don’t have the time, energy, or maybe even the know-how, why spin your wheels when help is a phone call or click away?
  2. Pay yourself first, take a percentage of whatever is coming in, and drop it into an escrow/safety/emergency-rainy-day account. You are going to need it and it will make your life so much easier.
  3. Leverage software to keep track of things and make a point of looking at it regularly. Not like all day, every day; clearly, that’s dumb. But it will help you with timing of income and payments, it will help you get leverage if you’re up-to-date before growth even begins, it helps you identify problem areas and inefficiencies, and it will help your poor accountant at tax time.
  4. DO NOT let your accounts receivable (you know, that money people owe YOU) linger out there in their wallets, when it could be in yours or invested in your business. Workflows and clearly defined processes help a lot here. Set a specific number of days for payment, and specific number of days before letters and reminder emails go out, and if that isn’t getting success, pick up your phone! My friend, you are not a bank! Well, unless you are, then that’s on you. One thing that might help speed up and automate the process could be making it easier for people to pay you. Do you only accept cash or check? Maybe you could offer online or other digital payment. Coincidentally, this would often help with invoicing, tracking, and staying on top of outstanding receivables, too.
  5. Control your payables. Just like you, your vendors, payroll, and other bills all have specific due dates. Make that cash available only on those times, not early, but within their windows of payment. Obviously, you have to pay your bills but maintain some discretion on when it leaves your hands. An opportunity to possibly save a little money AND control when cash is going, out in this regard, is your payroll. Don’t be Scrooge, pay your employees and pay them well, so they take care of the business. But maybe pay bi-monthly instead of bi-weekly. You’ll have two less payments to make (24 instead of 26) and you’ll save time and money on preparing the payroll for those distributions. Taking it a step further, instead of cutting checks and postage, adopt direct deposit!

In this world, Cash is King. I want you to be the King and I want you to feel great about your financial life and business. There are tons of other things we can do, short of raising our prices, that can make our businesses more efficient and less like work to run. Cash-flow is one of those things. Here were 5 suggestions; take the helm or ask for help.

What I Do & What I’d like to do

What I Do & What I’d like to do - Ahead full Wealth Managment

In this dialogue, I’m going to describe some of the things I’m doing in my financial world. Like many of you my family falls into the demographic of married couple, age range thirties through forties, and we have two beautiful little girls. We absolutely don’t have buckets of cash to invest, but we do have a lot of moving parts and life transitions that make planning paramount. It’s important for me share with you some of my values and opinions so you can better understand some of the decisions I’ve made along the way. It’s also important to be aware that I’m not the only decision maker; my wife has her inputs, and our environment has a say, too. Some key things that are important to me are; continuing my education and building platforms to share that knowledge and those experiences, providing experiences for my girls as they grow up and an education for them in the future, spending time together and traveling with my family, I started a new business and I’d like to see it thrive as a lifestyle practice, and lastly, I do not like debt and want to be free of it (but I understand it’s a tool to be leveraged).

DEBT AND CASHFLOW

When I came out of college, I had significant (like six figures worth) student loans to repay. My private loans had interest rates that were as competitive as you could possibly get them, like barely over prime. My federal loans, I managed to get knocked down to 6% by working with a Fleet and Family Support Counselor through the Navy. This was possible through the Servicemembers Relief Act. Furthermore, I took advantage of a military deferment option on all of my loans, and this was I think, my first mistake. So, I’ll get to what my strategy is today later on, but here is what I think I should have done back then: Since I was newly married and a geo-bachelor (meaning I was stationed somewhere my wife wasn’t), I had very little strain on my budget. But I got sticker shock and didn’t know anything, so I kicked the can down the road. I should have figured out what I needed, how much I wanted to do for entertainment, and dropped every other cent into those loans… They’d be gone years ago.

For us, the math worked out that it made sense for us to refinance my federal loans around the same time we refinanced the house we were living in. The interest rates were super low, we could reduce the term on our mortgage (and still pay less per month!), and it would be easier for me to pay a single monthly amount by combining the several payments; so that’s what we did, I paid off two of my four federal loans from cash flow and lumped the two higher balanced ones into my mortgage. So, I went from 5 monthly payments with interest rates all over the place to one, not including other obligations like my car or private loans. Our mortgage went from 30-year to 15-year. A nice little icing is that interest paid is still deductible in April.

Three years ago, this summer, we moved to our current house. We love the town, the neighborhood, the schools, the property (obviously), and this is to be our forever home, so we bought it. If you think you’re going to move in less than ten years, don’t buy. Do the math before you even start shopping for houses to determine what you can afford without being house-poor, to see the difference of cost-of-ownership versus renting, will it fit your family over the years, etc. In my opinion, it’s a waste of money that you could be allocating to something you value more than the appearance of success through homeownership, if you just rent. Even when you first start having kids, if you don’t think you’re going to be there long enough to recover your investment and build equity, why not just wait? So now we have two mortgages…

and a car loan… and the remainder of my private loans, plus sprinkle a little credit card debt in there. The way I’m attacking these and all my other family expenses, is through a bucket system. I have my static monthly bucket which consists of all my debt and fixed monthly obligations. I have my weekly bucket, this is my “control” cash, used for all those variable monthly expenses like groceries, beers, zoo trips, and movies. The last bucket is my Goals cash. In here, I’ve got retirement savings, the girls’ college, vacation money, etc. The way I filled these buckets is I assigned accounts to them (multiple when it comes to the goals bucket) and I estimated my annual income from all sources, subtracted my fixed obligations from that number, and put it and a little extra into the monthly bucket. The remainder, I used my budget to determine roughly my weekly needs and what I could spend less on (by cutting it, or coupons, discounts, self-control, whatever); that amount goes in bucket number two, and the last bit goes in my goals bucket. This part right here, is where my values come into play because I’m taking a little extra and putting it into my first bucket and I’m not a big fan of trimming the fat on my second bucket, I’d rather just try to earn more. If this were a Ven Diagram, though, my first bucket and third would over lap and you’ll see why in a minute. Inside my monthly cash, I’m using an Avalanche to pay down my debt. This means that I pay the minimum on everything, except the highest interest-bearing obligation I’m paying that little extra I dropped in. This overlaps the third because debt freedom is one of my goals, too. Skipping to that third bucket, I have monthly payments going to 529 accounts for my girls’ educations, a little bit going to cash value life insurance policies (for a hundred reasons!), and believe it or not, I recently stopped contributing to my retirement. Oh man, that’s taboo, I know! But I did that thoughtfully. I need that little bit of cash flow to help launch my new business and stabilize my cash flow until I’m paying myself a regular salary. So, it’s ok to pause retirement savings when you’re young to pursue opportunities or protect yourself for accumulating more debt. I give you that permission, so long as you don’t let it fall off your radar for the future. I review my personal and business budgets and cashflow about monthly to see how well I did and to adjust for any changes in goals or circumstances. What’s also important to note that what Erin (my wife) and I are doing, is that we aren’t living like paupers. Anyone that knows how often we go to Disney, knows that, and we make room for other trips together, too. We do take advantage of discounts where we can. We don’t buy things that we don’t find value in. In fact, I unsubscribe from newsletters and emails regularly because I want everything I see, I just don’t need them or value them. Ironically, I sign up anytime I am shopping for membership (not credit cards or store cards) in order to get whatever deals the retailer may have. We both have a history of driving our cars into the ground; I had my last one for ten years and so did she! So, we only spend on things that are valuable and important to our family like food and Disney trips. In planning, you have two choices when a goal has a shortcoming or not enough funding; save more by spending less, or just earn more. A lot of advisor, don’t discuss this viable option. When we moved, we didn’t sell the other house. I really, really wanted to because I do not want to be a landlord, I do not want the carrying costs of another house, and in the current market my return on investment is more than I can get mathematically selling than renting and depreciation. But I’m coming around to renting it because it will free up cashflow for our other family goals and ease some of the pressures today.

MY PLANS FOR THE FUTURE

I said before that I stopped my retirement contributions. Well, that is only temporary. Every dollar I contribute today towards debt will be reallocated to long-term savings in the future. The majority will be to retirement, the next bunch to the girls’ futures, and the last to some nice vacations with family. My retirement considerations are not as simple as deferring income to get the company match or just putting money back into my Roth while I qualify. The decision I’m going to make will consider funding a SEP or a Solo 401(k) plan, and under the circumstances what will be the most bang for my buck there. Small business owners and contractors stay tuned for that blog because I’ll go through the pros and cons of all of our choices.

I am also working on cultivating additional sources of income and “side-hustles”. One example, is by leveraging my Post-911 GI Bill to obtain my master’s degree. I’m getting additional education which I value personally and professional, plus, my tuition gets paid and I get a small monthly stipend. That monthly stipend helps me offset our family costs while I transition and launch the new practice (thus allowing my savings to stretch further, less risk). As that comes to fruition this Fall, I will work on teaching a couple classes at a local university. Again, not only will this bring in additional income, but helps me fulfill my goal of sharing knowledge with others. It might even help with my girls’ cost of education in the future, too. What I would suggest to you, is that you can’t do what I am doing anymore than I can copy your life, but the approach I think is the same. Identifying the things we value, knowing our numbers, and being systematic towards pursuing the lives we want are things everyone can do at home.

Tackling Your Student Loans

Tackling Your Student Loans with Ahead Full Wealth Management

According to the Federal Reserve Bank of New York, the fourth quarter of 2018 showed that outstanding student loan debt made it all the way up to $1.46 trillion! It’s no wonder then that many people my age, and older by the way, are still shouldering the weight of their educations. The impact of that is profound in that it is a serious source of anxiety for many, it pushes off other goals like children or property for many, and generally keeps a lot of great, hopeful, young professionals from engaging in financial planning because they want to clean that mess up first.
Well, that’s a lot easier said than done for most. Families and friends of mine, and yours truly too, are entering these awesome jobs with thousands of dollars looming over them and their incomes. Many are in positions to make great money, but if you asked them years after graduation, that debt will still be there. So, what are our options? How do we break free? How do I approach this systematically?

WHERE DO I LIKE TO START?

Where every good cash problem and solution starts, in my mind, is on our cash flow/budget and balance sheet. These don’t have to be crazy thorough, some of my spreadsheets get obscene when my inner nerd/engineer comes out. If you have no idea where your money is coming from and going to, we can find a time to talk about that. The point is, I like to know where I stand before I make any sort of changes and I need to know how much room I have to work with and develop strategies from. I also need to ensure that other needs aren’t going to sideline my goal of shedding these loans or other debts. The next two things you should compile are an inventory of your federal loans and your private loans. These will come from statements received or downloaded, or you can get your federal loans from the National Student Loan Data System (NSLDS), and you private loans from your credit report. You can actually pull your credit report up to three times per year for free without impacting your credit, once through each of the big three. The easy way to get there is AnnualCreditReport.com. Now, I take into account other things I have going on like if you have a 401(k) at work and what I might be contributing to that. Do I have any emergency savings on the balance sheet we just
made? So that part is crucial, it’s really hard to make any debt moves if one little bump will put you in more debt (there was an article I read that makes tons of sense that said “the first step in eliminating debt is to stop accumulating more of it”, poof, mind blown). Also, where do your values come into play? Is it more important to you to balance saving long-term with paying off debts today equally, or does your need to be history YESTERDAY; everybody has their own combination in this regard. So, my plug for those just starting out is to shoot for the balance. I like contributing enough to get the match (AKA “free” money) if available, it behooves you to have some emergency dollars starting to accumulate, and then, what’s an affordable monthly payment we can put to the student loans. The consideration for you here is to make it small enough to fit in your income but large enough so that less interest accrues. Then no matter what strategy we employ going forward, increase this savings number by a percent or two every year.
You’ll be hard pressed to even notice the difference you’re paying, but it will compound and pay serious dividends. A nice thing you’ll notice as we progress is the impact this will have on your credit score and your balance sheet.

OPTIONS AND TIPS BEFORE STRATEGIES

  1.  If you’re absolutely not ready to pay try reaching out to your lenders and asking for deferment (like if you’re going back to school, it’s pretty easy to defer payments), forbearance will allow you to push off payments, too, but interest will likely accrue. If you’re military this is an option to defer payments while you’re in.

  2. If you’re military, take advantage of the Service Members Relief Act for any debt you accrued before service to reduce the interest rate to below 6%!

  3. Be super wary and skeptical of relief agencies. I don’t care what they promise you.

  4. Discuss with a professional the potential for forgiveness, i.e. public service or education.

  5. Take into account tax considerations of repaying student loans versus other debt you may have and the impact of your filing status if you happen to be married.

  6. Depending on your interest rates, balances, and current credit history, you may consider consolidating federal loans or refinancing into private loans.

  7. Work with a professional to determine if you qualify for any particular repayment options (PAYE, REPAYE, IBR, etc.)

  8. Can we refinance any of your private loans, too?

REPYAMENT OF DEBT
So obviously as just covered, there are a ton of things that will impact the amount and style of your repayment. But assuming we’ve combed through all of those options above and zeroed in on our minimum payment amounts, our interest rates, and remaining principals, we go back to our earlier decision on how much can I reasonably put towards my student loans per month.
Initially, you’ll start with paying the minimum amount on all loans not deferred, in forbearance, or forgiven (obviously on that one) within the confines of any plan you got into like the income-based repayment plan. From there, I like to use one of three techniques that I apply to all debt: the avalanche; the snow ball; and the hybrid. The way each of these works is that you will pay the minimum established payment on all liabilities and allocate additional budgeted dollars to one obligation at a time. In the avalanche, we are accelerating repayment and reducing interest
paid by paying off balances with the highest interest first. It’s a little slower, with less instant gratification, but you’ll end up paying less over time. The snow ball, is more ground-up in nature.
You’ll pay the smallest balance off first then work your way up. It’s awesome for people that need little victories to keep them engaged. The hybrid is a mix of the two. It’s nice because you’ll capture a couple small victories by knocking out a few small balances right out the gate, but then transition into the avalanche. Whichever direction you choose, your monthly outlay never changes; each time a balance is paid off, you reallocate that monthly payment to the next
debt in line.

Example:
$100/month going to loan #1 $100
$100/month going to loan #2 $100
$150/month going to loan #3 Gets paid.

Your new payment next month looks like this:
$100/month going to loan #1 $100
$250/month going to loan #2 Still paying $350 but more efficiently cutting debt.

From here, I like to grow each year by increasing my savings a little bit so that it becomes automatic and my balance sheet grows while my debt shrinks, without it hurting really at all. Any windfalls or additional income I have, I can allocate across the board according to my values automatically: I make a policy to myself that if I get, say $1000 more than expected; $500 will go to whichever debt I’m accelerating, $250 might go to my retirement savings or emergency fund,
and that last $250, could easily go towards a night out with my wife and daughters or into our “Disney Bucket.”

Whatever you choose, you have to make sure it works for you. Because like a diet, if you bite of too much too soon and it sucks, you’re not going to stick with it.

Planning Earlier to Succeed Sooner

Planning Earlier to Succeed Sooner with Ahead Full Wealth Managment

There is constant flak associated with the Millennial generation because, as should’ve been expected, they do things and think just a little different from their predecessors. I don’t actually care about all that. What I do care about is that we’re not yet the target market for most financial service professionals, and what’s worse, is that we impose our own limitations on ourselves. Often times we’ll turn to Google before we turn to a professional for help. This isn’t everyone, but it is common enough.

WHY GET A PROFESSIONAL

The things I hear the most from my peers are: “I have to concentrate on paying off my debt before I can focus on growing my wealth”; or “I don’t have any wealth to invest, yet;” and “oh, I’ll work with someone once I get everything figured out first.” To me, those statements seem counterintuitive (and not because I’ve started a new practice and want people to work with me!). The way my head works is that math is math and if I can optimize anything, I will probably reach my goal sooner. I believe that being emotional and empathetic are some of our most powerful qualities, but they also significantly work against us. They get in our way of seeking help, they inhibit our success in the market, and just imagine the momentum we could have if someone could help us direct our emotions to be in alignment with our goals. For example, I can easily do a quick web search on best ways to pay off my student loans: I can use the “avalanche” to pay off highest interest first; the “snow ball” to get a series of victories by attacking balances first; I can just as easily adopt PAYE and REPAYE plans and/or work for debt forgiveness on certain federal loans. It’s not as simple for everyone as just deferring to the math to define which is best for them, and that’s where a professional comes in. And I’ll let you in on a little secret, the most math efficient technique in any area of planning is NOT always the best. A fun example is in the design of submarines. An engineer can figure out mathematically the best way to decrease friction, reduce heat loss, maximize output, and how to cram as much stuff into a small space as possible, but if they aren’t careful, they’re going to put some critical valve or component upside down in some horrid location that a technician can’t get to let alone perform maintenance! It’s the same with dieting; I know I can lose ten pounds by axing carbs. At the same time, I’ll quit that diet if I can’t drink my beer when I want. The same goes for budgeting and every other concept, you have to take the person into consideration. It’s not an easy task, even for the most self-aware individuals.

Working with someone can help you fit the best strategy to you thus increasing the probability of success. Professionals should be able to address the behaviors and feelings that only an objective perspective can. I like to think that as I move through life transitions, even without “wealth” to invest, that my life would be more fulfilling if I had a sounding board, a coach, an advisor and advocate that could keep me on track, make me aware, or teach me the things that I know I don’t yet know. If can start the process earlier and make small tweaks here and there as I go, two things will happen; (1) I won’t have to make a huge correction later on because I started later, and (2) I’ll be on my desired path sooner, which will feel much better. Plus, the more time we have left to our own devices (regardless of how great a DIYer you are), the more time we have to make mistakes.

WHAT CAN YOU DO BEFORE PAYING SOMEONE

Especially for the younger generations, on a personal level cash flow always seems tight. So, before we rush to hand our money over to, what seems like, every professional we meet, let’s figure out what we can do first to make the most out of that time. I approach this the same way I approach planning, I ask a few questions. “What would I want if there weren’t any obstacles?” “What have I learned from the past decisions I’ve made?” And lastly, “what’s going right that I’d like to see more of?” These questions set the groundwork to answer personal value questions, they help you set goals and objectives if you don’t have any yet, not given it thought, or need to clarify existing ones. A little self-reflecting can help us identify our own habits, biases, passions, and strengths which facilitate making behavioral changes, adapting, and evolving our dreams to even bigger possibilities.

From here, take a snap shot of where you’re at and the ideas you’ve tried and are trying. Typically, in the finance world that may look like a balance sheet and a cash flow statement. Naturally, you can see the logic in that if cash flow is a concern. You simply can’t stop the bleeding if you don’t know where the money is going. And that’s a big part of getting to work, is getting organized and being aware of where you are. Once you know this you can take steps to optimize the course you’re heading or completely change directions. That power is up to you now. For money especially, the anxiety of not knowing and feeling overwhelmed by these burdens is very real. The more financial stress we have the more we tend to make missteps, too. So, take a little bit of time and figure out where you are and one small thing you can do again or do differently, and I’ll bet you see a dramatic change in the long run and in how you feel.

Now that you know roughly where you’re at and one thing you’d like to adjust or replicate, the next step is what kind of person can help me make this make sense and work better. Find professionals that specialize in your objectives and interview them. How they get paid, not necessarily just how much. What is their personality like and what’s their approach? This person is going to learn a lot about you, hopefully you like them, and at the same time we don’t want them to just be a “yes” man or woman. Share with them what you are good at and areas that lack your interest so they can best help you. If you’re super analytical ask them for the math or the statutes so you can understand and internalize the advice. If you’re more visual, explain that certain graphs make you more comfortable or to slow down with the math. The point is to find and articulate the style that works best for you so that the advice you receive is more actionable for you and takes less time to arrive at. Therefore, you have better value and bang-for-your-buck.