Pay Off Student Loan Debt Faster With This Easy 5-Step Formula

According to the Federal Reserve Bank of New York, 11.5% of student loans are delinquent by 90 days or more, or are in default. Although this seems like a small percentage, for the borrowers faced with mounting defaulted or delinquent student loan debt, the effects can be devastating. Delinquencies and defaults can negatively affect your ability to borrow more in the future, increase interest rates, and even cause tax refund offsets or wage garnishments. This can be avoided with just a few specific actions.

General Student Loan Debt Facts

First, let’s start with a general picture of the student loan landscape. The most recent reports indicate:

  • There is $1.56 trillion in total U.S. student loan debt
  • 44.7 million Americans have student loan debt
  • 11.5% of student loans are 90 days or more delinquent or are in default
  • The average monthly student loan payment (among those not in deferment) is $393
  • The median monthly student loan payment (among those not in deferment) is $222

Pay Off Your Loans Faster

Paying off your student loans at a quicker pace can save you, the borrower, money in the long run. Here are five steps you can follow to get ahead of the game:

  1. Make more than the minimum payments. For example, let’s assume you have $100,000 of student loan debt at a 7% interest rate with a standard 10-year repayment term. By paying only $100 extra per month, you can save $4,696 in interest costs and pay off your student loans 1.08 years earlier.
  2. Get advice from a professional financial advisor. Advice from a professional can make all the difference in the world when it comes to getting the most “bang” for your retirement buck.
  3. Split your payments in two. Say you owe $30,000 in student loans with an average interest rate of 7%. Over a standard 10-year repayment period, you’d be making monthly payments of $348. If you instead make $174 payments every two weeks, you’ll be debt-free 13 months sooner and save $1,422 in interest.
  4. Refinance. You can potentially save tens of thousands of dollars throughout the life of your loan by refinancing. There are three main benefits to refinancing student loans:
    • You can get a lower monthly payment, freeing up cash for other expenses or investing.
    • You can pay off your loan faster, saving you money in interest.
    • A lower monthly payment decreases your debt-to-income ratio, making it easier for you to qualify for a mortgage.
  5. Invest. If your student loan interest rates are less than 6%. Then you have some room to use the market to your advantage. Here is an example:Let’s say you only have $50,000 in student loans. With a 20-year term and a 4% rate, the monthly payment will be $303. If you contribute $500 per month to your payment, you’ll be student loan debt free in around six years.You start by investing $500/month in a tax-sheltered portfolio at a yearly 8% rate. You’ll have nearly $46,000 in your portfolio at the end of six years. Your student loan at that time would be $38,754. After just six years, your investment portfolio could exceed your student loan balance by $7,246.

These strategies require a full overview of your financial situation and goals. Who better to help you through this process than one of our CERTIFIED FINANCIAL PLANNER™ professionals? Sign up today to get started!

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

The High Cost of NOT Having a Financial Advisor

Planning for your long-term goals — especially retirement — can be a lot like driving a car with faulty airbags. In 2019 alone, tens of thousands of cars from at least 5 different auto manufacturers have been recalled because the airbags are in danger of deploying “inadvertently.” Something as minor as driving over a pothole could trigger the airbag.

Imagine driving a car like that… knowing that the airbag could pop out and hit you or a passenger in the head at any moment, without warning. How long would you continue driving that car?

 You wouldn’t put up with that very long — especially when the manufacturer recall gives you the option to get it fixed for free.

Research Doesn’t Lie

Here’s the thing…

According to research, 96% of people who haven’t retired yet are concerned about their post-retirement finances. Retirees aren’t much better: 89% are nervous about their finances over the long-term. You might say they’re worried their plans might blow up in their faces at any time, just like a defective airbag.

But even though that 9 out of 10 people are concerned about their finances, only 52% of pre-retirees and 44% of retirees consult a financial planner or adviser.

You know what? Maybe that’s not surprising. Because unlike recalled cars, financial planning may have a cost attached. It may require you to make some changes in behavior to reach long-term goals. And who wants to change? Instead, they keep moving steadily toward retirement time, feeling anxiety and uncertainty about how they’re going to make it after they stop working.

Reaching out to an adviser is a powerful way to counteract the fear and stress that comes with not knowing what the future will hold — and not knowing what to do now to adequately prepare. So, if for no other reason, most people should consider speaking with a financial adviser for the peace of mind and clarity the conversations can bring. For many, the peace of mind alone (both for themselves and their families) would be worth the cost. But the benefit of speaking with an adviser go far beyond reducing stress and boosting confidence.

A study by HSBC called “The Future of Retirement,” found that people who met with a financial planner accumulated, on average, nearly 2.5 times more retirement savings than those who hadn’t made a plan. That’s the difference between having $200,000 and half a million dollars. Or between $500k and $1.25 million for your retirement. And the earlier you get started, the more time you give your money to grow and compound.

Yes, it’s true that financial advisers and planners have fees, and that might be intimidating for some. But these days, there are advisers to fit virtually any income level. You don’t have to be a six-figure earner to afford financial advice. And, again, when you think about the additional savings and investment returns that may be possible with the help of a professional, those fees may pale in comparison. Trying to avoid paying for financial advice is like squeezing your fists tightly to avoid dropping quarters… and letting your dollar bills fall to the ground.

We encourage you to speak with a financial professional as soon as it makes sense for you to do so. An adviser can walk you through your options and help you build a plan that fits your personal situation and your goals.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

The 95% Secret: 4 Steps to Reaching Your Financial Goals

Think about your most audacious goal. You know the one. The one that makes your heart race a little bit whenever you to think about.

What if there was a simple tool that would give you a 95% chance of reaching that goal? You probably wouldn’t waste a minute trying to get your hands on it. This isn’t just a pointless mental exercise. According to research, there really IS a tool that can increase your chances of success to as much as 95%.

It may surprise you to know that the tool we’re talking about is accountability. Yes, just asking another person to hold you accountable stacks the odds in your favor big time. No harassment is required, either. You don’t have to find a retired Army drill sergeant to follow you around and force you to do the work. The simple act of committing to another person can change everything about how you perform.

Our brains are hard-wired for consistency, both in how we see ourselves and how we want other people to see us. We want to do what we’ve said we’ll do — especially if we know other people are watching. When obstacles get in the way, we might be tempted to cut ourselves some slack because we tend to believe our own excuses. But knowing that someone is going to hold you to your word creates additional motivation to do the right thing.

The results can be incredible.

Research performed by the American Society of Training and Development found that after committing to a third-party, a goal-setter’s probability of success climbs to 65%.

Setting up regular meetings with an accountability partner boosted their success rate all the way up to 95%.

How to REALLY Be Accountable

To stay on track with your budgeting, saving, and investing objectives, very few things are likely to help you more than making accountability a part of your process.

Here are 4 steps to add this powerful tool to your financial arsenal:

1. Set clear goals. They need to be clear so you can accurately measure your progress. Break long-term goals into a series of shorter-term goals to make your progress more tangible and to build momentum.

2. Find an accountability partner. It works best if he or she can remain completely objective. It can be a peer, a mentor, or a financial advisor. A close friend or relative might be more impacted emotionally by the excuses you may give them. You want someone who will really keep you honest. Tell that person what your specific goals are for saving and investing. Commit to a specific plan and timeframe.

3. Schedule regular, on-going meetings to discuss your progress. The research suggests that if you get this far, you have a 95% likelihood of reaching your goal. Your commitment level is high and you’re willing to accept help from others to get what you want.

Regular, frequent meetings help ensure you’re constantly aware of where you’re at. They can help you determine if you need to make changes to reach your objective faster. You can also set new goals as you crush the ones you set in the beginning.

4. Celebrate your wins. When you make progress, or when you successfully avoid an obstacle that may have stopped you in the past, you should feel good about yourself. It’s okay to celebrate, or even reward yourself.

Incentives are another effective tool to help you keep up the momentum. Set clear milestones, such as accomplishing a short-term goal. Then, reward yourself with something meaningful… but something that won’t mess up your progress. So don’t buy a brand new Mercedes too early! You may also consider adding penalties if you don’t hit your deadlines.

Bonus: Consider making Freeman your accountability partner. The Freeman Capital Our support team is always available to help. You can also set up meetings with a CERTIFIED FINANCIAL PLANNER™ professional who can take accountability to the next level with specific tools, resources and expertise.

The sooner you get started with an accountability partner, the sooner you may be on the fast track heading toward your financial success.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Are You Destined to be Rich? Here’s the Best Way to Find Out​

Earlier this month, the New York Times posted a quiz on its website to help you figure out if you’re actually rich, but you just didn’t realize it. The quiz tells you whether or not you’re rich based on your income, where you live and what being “rich” means to you.

It’s quick and fun… but it’s completely misleading.

Because the idea that income is not the only or even the primary measurement of a person’s wealth. (To be fair, the NYT quiz acknowledges there are other factors to consider on the results page.)

This is a persistent, even harmful myth.

A High Income Isn’t Enough

Here’s a simple illustration: Imagine a woman named Lisa gets a new job with a 50% pay increase, what’s the first thing most people do? She increases her spending by (at least) 50%, of course!

At the end of the year, Lisa has nicer clothes, a newer car and more pictures of fancy meals on her Instagram. But she probably doesn’t have much more money in the savings account. She hasn’t invested in any assets that will increase in value. And if Lisa loses their job unexpectedly, she’s just as unprepared as she would have been if she was still making her old salary. If we’re being realistic, she may be in even worse shape because her car note is more expensive!

How much money you make isn’t what really matters. What matters is how much money you keep — and grow.

Here’s another illustration: Let’s imagine Gwen. Her income is average,  but she consistently puts a portion of her paycheck to the side to save or invest.

Over the years, Gwen saves up an emergency fund — cash she can use if life throws her a curveball. She funds her retirement accounts so that she can be confident she won’t have to work until she’s 80 years old. And she even pays off her house ahead of schedule.

Who would you say is richer, Lisa or Gwen?

Her Instagram may be less glitzy, Gwen is the wealthier woman. She owns her home. She has money in the bank and a healthy 401(k). Lisa may not have any wealth at all. She doesn’t really own.

These illustrations are oversimplified, but they help us visualize and understand why income does not equal wealth. Income can lead to wealth, but it doesn’t always. According to a recent Nielsen study, one in four Americans who earn $150,000/year or more are living paycheck to paycheck.

In other words, focusing on your income can keep you broke.

Net Worth is the Key

If you really want to be rich (or at least richer), you should be focused on your net worth.

Your net worth is pretty simple to figure out. It’s your assets minus liabilities. The things you own that are worth money (cash reserves, stock portfolio, real estate) minus the things that cost you money (debts and expenses).

Wealthy people tend to obsess more over their net worth — their ranking on the Forbes 400 list, if you will — much more than their income. In her book “The Next Millionaire Next Door,” Stanley Fallaw found that income only makes up 8.2% of the average millionaire’s net worth. But you don’t have to be wealthy in the eyes of the world to benefit from intentionally working on your net worth.

Can you bear one more illustration?

Let’s talk about Serena. She has an average salary at work, but she saves aggressively so she can buy income-producing assets like real estate and dividend stocks. Her sacrifice pays off because within a number of years, she may be able to totally replace her employment income with the passive income generated by her investments.

Let’s say she’s bringing in $4,000 a month from those investments and her monthly expenses are just $3,000. She doesn’t have to work if she doesn’t want to, and she’s still able to save or invest $1,000 every month.

That’s what wealth looks like. 

Do you know your net worth? YOU SHOULD.

Check out this net worth calculator today and find out how you’re doing.

And reach out to a financial advisor. if you’d like some guidance on what might be the right way for you to improve your personal net worth.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance. 

Saving Vs. Investing (And Why You Need to do BOTH)

For many people, the concepts of saving and investing seem like they’re pretty much the same thing.

  • They both have to do with money. Money you don’t get to spend today.
  • They’re both something we know we should be doing… but we often struggle to make them happen.
  • And they’re both supposed to make the future more secure.

But there are significant differences between saving and investing. The biggest difference is this:

Savings are usually used for short-term goals, such as making a major purchase or putting money aside for an emergency fund. Investing is usually a longer-term activity, focused on building wealth or preparing for retirement.

The way you think about saving and investing will differ depending on where you are in your financial journey.

What is Saving?

Saving is a fairly straightforward concept. Basically, you’re putting money aside for an expense you see coming in the future. In most cases, that expense or need isn’t years away; you may be planning to pay for a vacation or buy a new car.

In general, savings is in the form of cash. That way, you’re able to access it immediately. When you’re ready to spend it, or when the need arises

When you’re saving, you can put the money in a low-risk account like a savings account or certificate of deposit, or CD. Many people consider a CD to be an investment, but they technically fall under the savings category.

You could put cash into a coffee can, but that’s not recommended. It’s not very safe and you won’t earn any interest while it’s sitting there.

What is Investing?

Investing is all about making your money work for you. When you’re saving, you accumulate money by putting it into your account. There’s a small amount of growth coming from interest, but these days, that number is usually very small.

Investing is different. The activity is designed to make your money grow, especially over the long term. Stocks, bonds, mutual funds, and exchange-traded funds (ETFs) enable the investor to own something that can become substantially more valuable over time.

There are also risks that come along with investing. There’s a chance any investment can decrease in value. In some instances, an investment can become worthless and investors lose 100% of the money they put into it.

In most cases, though, investing in stocks and mutual funds with a longer-term perspective delivers positive growth.

“Should I Save or Should I Invest?”

With few exceptions, everyone should be saving – or at least making the effort. It’s a good idea to put a percentage of your income into some sort of savings automatically. This protects you from frivolous spending, ensures you have cash available in case of emergency, or if an opportunity arises you’d like to be able to take advantage of.

Have you ever met someone who regretted having too much money in the bank?

It’s also important to start investing as early as possible. Why? Because the most powerful benefit of investing is compound interest. The sooner you get started, the more time your money has to grow – and you may be shocked to see how fast that growth happens once it gets going.

Earlier in life, you can be more aggressive in your investing, taking on a little more risk for the possibilities of bigger gains. Later in life, it usually makes sense to be more conservative. You want to minimize the risk of loss, even if it means less growth.

In conclusion…

No matter what stage of life you’re in, your financial future is in your hands. You’re the one responsible for building that future; saving and investing are the tools of the trade.

If you’re not already doing it, make plans to start saving AND investing. Then, take the necessary action steps to put those plans into practice.

Freeman Capital is here to help.

Freeman Capital Advisors is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and, unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.