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Help! We Don't Have Enough Savings to Pay for College

Q. What’s the best way to pay for college? We won’t get much financial aid and I think it will cost about $30,000 a year. We only have $40,000 saved. We have equity in our home, 401K plans, Roths and our son can take student loans. Help! — Mom

A. There is no one best way to pay for college, but we want to give you some options to consider.

Like a lot of people, you might be surprised by how much of the bill won’t be covered by aid.

The first option to look at is scholarships, said Lisa McKnight, a certified financial planner with Lassus Wherley in New Providence, New Jersey.

Free money is the best money, she said.

“Consider schools where you child stands out academically for your best bet at scholarship offers,” she said. “You should also consider the many scholarships found within your local community.”

McKnight said high schools typically have resources for students to help them find scholarships. One other resource is The College Board, which has an extensive database of scholarships.

Next, your student should investigate work/study programs or working during school, McKnight said.

“Student employment via a federal work/study program, or even part-time work outside of a work/ study, is a great way to have the student help finance their education,” McKnight said. “It’s important to balance working with academics, so you will need to determine if you’re student is someone who can make both work.”

You won’t necessarily have to make a whopper payment for tuition. While universities will bill for each semester, it seems that coming up with a full semester’s payment all at once would be tough.

But, most schools offer payment plans that allow you to stretch payments out over the course of 10 months or a year, McKnight said.

Next, you’ll probably need to consider loans.

“Even parents who could afford to pay for college out-of-pocket may choose to make student loans part of their college payment strategy in order to avoid asset liquidation or to give their child some responsibility for his or her own education,” McKnight said.

You’ll need to see what federal loans you and your child are eligible for. Be sure to look at Direct Subsidized and Unsubsidized Loans and Direct Parent Plus Loans. You can find private loans too, but these often require a co-signer.

In looking at home equity, there are pros and cons here.

“It may be cheaper and easier to secure then a federal loan, it has fewer restrictions, and is tax-deductible,” McKnight said. “However, there are some significant cons — primarily home equity loan debt is secured by your home, giving the lender a legal claim to your home in the event of default.”

This becomes a secured debt backed by your home, McKnight said, and you’re basically putting your home on the line and you are trading a hard asset (your home) for a soft asset (education).

You said you have Roth IRAs, and you can withdraw from your Roth IRA contributions at any time without penalty or tax for any reason, McKnight said. You can also withdraw earnings without the 10% penalty if they’ll be used to pay for qualified education expenses.

Your 401K should be your absolute last resort.

The drawbacks are many.

If you withdraw funds before you are 59 1/2 years old, you may owe a 10% premature distribution penalty and taxes on the withdrawal, she said.

Plus, frequent dips into your 401K will reduce balances and the benefits of compounding and tax deferral, and ultimately the overall funds for your retirement, McKnight said.

“If you have no other options then the tap the 401K, consider a loan — if your plan allows — and read the fine print regarding interest, borrowing limits, repayment terms, etc.” she said. “Borrowing from your 401K will incur double taxation.”

By that she means you’re repaying the loan with after-tax money and then you will be taxed again when you withdraw the funds in retirement.

“If you quit or lose your job the loan balance may need to be repaid in full within 60 days,” she said. “It is very important to ensure that you aren’t putting yourself at risk in your effort to assist your children with paying for school.”

McKnight said because borrowing or withdrawing from retirement plans have risks, you should speak to a financial professional for help so you make an informed decision based on your overall situation, and help ensure that you aren’t putting yourself at risk in your effort to assist your child with paying for school.

“It is important that you explore all of your resources when developing a college payment plan,” she said. “A little strategic thinking can go a long way toward maximizing financial resources and minimizing college payment stress, no matter what your income level.”

[Editor’s Note: The interest rates on certain loans, like private student loans or home equity lines of credit, will be affected by your credit. You can see where yours stand by viewing your free credit report summary on Credit.com.]

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This article originally appeared on Credit.com.

Hash browns recalled for possible contamination with golf balls

Hash browns sold under the Harris Teeter and Roundy's brands have been recalled for an unusual reason: possible golf ball contamination.The Food & Drug Administration's recall notice says that McCain Foods USA, Inc. has voluntarily recalled frozen hash browns sold under the Harris Teeter and Roundy's brands because they may be "contaminated with extraneous golf ball materials, that despite our stringent supply standards may have been inadvertently harvested with potatoes."

>> Read more trending news

The FDA warns consumers that, "consumption of these products may pose a choking hazard or other physical injury to the mouth." No injuries have been reported, according to the FDA.The recalled products include Roundy’s 2 lb. bag of frozen Southern Style Hash Browns (UPC 001115055019) and Harris Teeter’s 2 lb. bag of frozen Southern Style Hash Browns (UPC 007203649020). The recalled products were manufactured on January 19, 2017 and bear a production code date of B170119.The Roundy’s products were sold at Marianos, Metro Market, and Pick ‘n Save supermarkets in Illinois and Wisconsin. The Harris Teeter products were distributed in North Carolina, South Carolina, Virginia, District of Columbia, Delaware, Florida, Georgia and Maryland. 

9 Things to Do to Spring Clean Your Budget

Many of you probably have a spring-cleaning ritual. It is the time of the year when you wash the windows, air out the bedding and declutter. However, have you ever thought about sprucing up your budget?

That may sound strange, but it is the perfect time of year to take a good look at your finances. We’ve got some ideas of what to do to spring clean your budget.

1. Check Your Envelopes

Now would be a good time to make sure your cash envelopes (see how they work here) have the right amount in them. Take a look at your spending and determine if you need to make adjustments (up or down). Even if you don’t use cash, you should do this with your virtual envelope system as well.

You also need to make sure you don’t need to add new envelopes. Perhaps you find that you always go to your dining out envelope to get money for family fun. Why not make a separate envelope just for family fun? Now you have envelopes with a designated task and don’t need to take from one to fund another.

2. Clean Up Your Bills

Take a look at your spending. Are you paying for things you don’t need? Sometimes, we get so used to paying regular expenses that we ignore them.

For instance, you might not be ready to cut cable completely. However, are you paying for channels you really don’t watch? Go through your bills and make sure you aren’t wasting money on things you don’t use. (You can see seven easy ways to lower your cable bill here.)

3. Looking for Discounts

One of the goals of a budget is to help you keep as much money in your pocket as you can. Look back on your spending and you may discover you have items that could offer you a discount.

Believe it or not, there are many utilities that offer discounts to customers. You just have to know how to get them. You can take the time to research what others pay and call each company and try to negotiate your rates.

Once you make the phone calls, take additional steps to lower your utility costs. Your budget will thank you.

4. Establish New Goals

Goals are a tool we use in many areas of life, but what about budgeting? The truth is, you might already be setting goals and without realizing.

A goal could be as simple as paying down one credit card. It might be going on a dream vacation. Perhaps it is buying a car without a loan or paying for the first year of college tuition.

Whatever your goal, make sure you write it down. That instantly solidifies the goal. Then, you can place it somewhere you see it, every single day.

The more you see the goal, the more you remember what you want to achieve and hopefully avoid impulse purchases.

5. Lower Your Grocery Bill

This may seem like a strange one, but it can make a huge difference. It might mean shopping at a somewhere else.

For example, I slashed my grocery budget by switching to a difference store. By using this store to get most of our food, I dropped our grocery spending by more than $200 a month.

6. Transfer Your Credit Card Balance

This is the perfect time to look into getting a card with a 0% interest rate And transfer your balance to the new card. This will help eliminate interest on your balance, which might help you pay it down more quickly.

Just watch the introductory period. You need to pay the balance in full or transfer it again before the period lapses. Otherwise, you could end up paying even more in interest. (Interest rates are often based on creditworthiness — See two of your scores free on Credit.com.)

7. Lower Your Cellphone Bill

Most people think they are stuck paying whatever their wireless provider charges. That is true, for the most part.

However, you might be able to negotiate a lower rate. You may want to consider changing providers completely. Just call and see what happens.

8. Automate Your Savings

If saving money is difficult for you, you are not alone. Many people don’t have the discipline needed to save money every month. That is where automation helps.

You can see if your employer allows for your check to be directly deposited into multiple accounts. If so, have them deposit some of your paycheck directly into a savings account. If that is not an option, set up an automated transfer from your checking account into your savings account each month.

Once you do that, you will need to adjust the spending in your budget. Even saving just $25 a paycheck is better than nothing. You’ll be surprised at how much you do not miss the money.

9. Review Your Insurance

Take a look at not only your auto insurance but also your homeowners and life insurance.

Do some comparison shopping to make sure you are getting a good rate. If you get insurance from different providers, check to see if any of them offer any type of bundle discount. That might be reason enough to move all your coverage under one company.

If you’ve built up your emergency fund, you might be able to raise the deductible and lower your monthly out-of-pocket cost and save more than the deductible costs. Increasing your deductible from $500 to $1,000 could save you a lot of money in your monthly costs.

In addition, if you do not yet have life insurance, now is the time to consider purchasing it. It isn’t for you. It’s for your family. Read more about why you need life insurance.

Taking the time to review your budget is wise, but we don’t always take a close look. Plan to do this each year along with your spring-cleaning schedule and you’ll never forget again.

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This article originally appeared on Credit.com.

Writing YOUR Success Story

Once upon a time….

It’s the classic opening to our favorite fairy tales. As children we dream of magic potions and knights in shining armor that will provide our happily ever after. How...

Credit Card Interest 101

MoneyTipsYou know that it's desirable to have a high credit score in order to get a low credit card interest rate, but do you know why your credit score is important — or how the interest on balances is calculated? Tiffany Aliche, Financial Educator and Author also known as "The Budgetnista", explains the thinking of credit card issuers: "If you have a higher credit score, that means you are more likely to pay back. And if you are more likely to pay back, they are more likely to lower your interest rate...if you are not likely to pay back, people want their money upfront." If you're not sure what your credit score is, you can check it and read your credit report for free within minutes using Credit Manager by MoneyTips. When a credit card company considers you higher risk, you will be offered a higher annual percentage rate (APR). That APR is indirectly used to calculate the interest on your balances. Most card issuers divide the APR by 365 to produce a daily periodic rate (DPR). That daily periodic rate is applied to your average daily balance for the entire billing period to determine your interest charges for the month. Consider this simplistic example. Assume your credit card has a 14.6% APR. Divide that by 365 days to get a DPR of 0.04%. If your average daily balance were $1,000, your daily interest charges would be $1,000 x 0.0004, or 40 cents per day. Given a 30-day billing cycle, your total interest charges for the month will be 30 x $0.40, or $12. Carrying a balance affects your total interest in more subtle and long-lasting ways, because it eliminates the effects of the grace period — the time gap between the end of a billing cycle and the due date of the payment for that billing cycle (typically around 25 days). When you pay your bill for the previous billing period by the due date, there are no interest charges applied to purchases that you make during the current cycle. If you fail to pay the previous billing cycle by the due date, interest begins accruing on your current purchases the day that you make them, thus increasing your monthly balance for the current period. Depending on your credit-card terms, it may take a full two months of paying in full by the due date in order to restore your grace period. You must also consider "trailing interest"; the amount of interest accumulated over the days between the end of the cycle and the date your payment for that cycle is received. For example, if your billing cycle ends on the 15th of the month and you pay the bill in full on the 20th when you receive it, those five extra days of interest accrued without a grace period would still be considered a carryover into the next billing cycle. To avoid trailing interest, pay your bill on the last day of the cycle using an automatic bank transfer. Cash advances and other non-purchase transactions such as balance transfers may not follow the same rules as purchases and may accrue interest immediately. Read the terms and conditions of your credit card to find out how different types of transactions accrue interest and whether a grace period applies. Lower interest rates dampen the effect of carrying a balance, but how can you achieve a better interest rate on your credit card without a significant change in credit score? Matt Schulz, Senior Industry Analyst at CreditCards.com, suggests a way to potentially get a better rate: ask for one. Credit card issuers are keenly aware of their competition, and if you are a customer with a good history and excellent alternative cards, you may be able to leverage a better rate. According to Schulz, surveys at CreditCards.com showed that "about 80% of people who asked to have a reduced APR from their credit card get it...only about one in four people ever ask." Of course, there is one sure way to deal with credit card interest — never charge more than you can pay off at the end of the month. You control interest by using the grace period to avoid it entirely. Remember the advice of Leisa Peterson, Certified Financial Planner® and Money Coach at WealthClinic®, "It's really nice to be in the driver's seat when it comes to money." If you want more credit, check out MoneyTips' list of credit card offers. Photo ©iStockphoto.com/Zerbor Originally Posted at: https://www.moneytips.com/credit-card-interest-1013 Ways To Lower Credit Card InterestCredit Card Grace PeriodsBalance Transfers 101

Credit Card Interest 101

MoneyTips

You know that it's desirable to have a high credit score in order to get a low credit card interest rate, but do you know why your credit score is important — or how the interest on balances is calculated? Tiffany Aliche, Financial Educator and Author also known as "The Budgetnista", explains the thinking of credit card issuers: "If you have a higher credit score, that means you are more likely to pay back. And if you are more likely to pay back, they are more likely to lower your interest rate...if you are not likely to pay back, people want their money upfront." If you're not sure what your credit score is, you can check it and read your credit report for free within minutes using Credit Manager by MoneyTips. When a credit card company considers ...

United Airlines wants more time to answer questions about passenger dragging

The CEO of United Airlines has asked for more time to give U.S. senators a full explanation of why a passenger was forcibly dragged off a flight, prompting national outrage.

>>Original story: Man forcibly removed from flight after not voluntarily giving up seat on flight

Senators on the Commerce, Science and Transportation had given United until April 20 to respond to questions. 

“We are in the process of gathering the full set of facts about this incident and finalizing a thorough review of our policy,” United CEO Oscar Munoz wrote. “We look forward to sharing the full results of this ongoing review and the immediate, concrete actions we will take to better serve our customers with the committee.” 

>> Related: United Airlines passengers describe scene as man dragged off flight

Munoz requested an extension until April 27 to answer the senators, whose April 11 letter asked about the actions of the airline, security and the passenger, David Dao. 

The Chicago Department of Aviation also requested more time to answer questions about the incident. 

 >> Read more trending news

“We’re disappointed that neither United Airlines nor the Chicago Department of Aviation has yet provided substantive answers to the straightforward questions we asked about the forcible removal of a passenger on April 9, 2017,” senators on the committee said in a joint statement. “Getting answers for the public about what happened and what can be done to prevent such an incident from happening again is a priority for the members of our committee. We find any further delay in getting necessary answers unacceptable.”

>> Related: United Airlines changes policy after man dragged from plane

IHG data breach expands, affecting over 1,000 hotels

What was thought to be a relatively limited data breach at InterContinental Hotels Group properties has expanded to include over 1,000 hotels across the United States and Puerto Rico.

The data breach was first revealed in December, according to Krebs on Security. Fraud experts detected a pattern of a widespread credit card breach at IHG properties, but IHG claimed in February that the breach was limited to about a dozen properties.

>> Read more trending stories

It was revealed this week that the breach is more widespread. Researchers found that credit card data at over 1,000 IHG properties was compromised. A full list of IHG hotel brands can be found on the IHG website; they include InterContinental, Holiday Inn, CrownePlaza and Candlewood Suites. 

Customers can use an online tool on the IHG website to see if a hotel at which they stayed is part of the data breach.

Get Ready for National Small Business Week

 

 

 

 

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Why Don't More People Own Life Insurance?

MoneyTipsOne of the biggest things I learned in the military long ago was that proper prior planning prevents pitifully poor performance. I am astonished at the number of otherwise seemingly intelligent adults who do not have some amount of insurance, even if only enough to prevent placing the financial burden of paying for their funeral on their loved ones upon their death. Life insurance comes in all shapes and sizes and there IS a plan available to satisfy everyone's needs. Some plans are temporary; some plans are permanent. The younger one purchases coverage, the cheaper it will be. Today's life insurance policies are no longer the "death" insurance policies of yesteryear. Many companies offer products with LIVING benefits - benefits that guard against the insured becoming chronically, critically or terminally ill at some point during their lifespan, and allow for the access to the majority of the death benefit while the insured is still alive. Some will argue that they don't have a "need" for life insurance, that they have the assets to cover the cost of a funeral. But I believe in the smartest use of money. If the average funeral in the US costs around $10,000 (and that's if you die TODAY and doesn't take into consideration rising costs and inflation), instead of having to drain an account of $10,000, or worse, having to sell off assets to come up with the cash, a Single Premium Whole Life policy typically delivers at least a 25% return on one's money (depending on age). That's an IMMEDIATE return! For example, with one of my carriers, a 65-year-old female non-tobacco user could "trade" a premium of $10,000 for an immediate death benefit of $18,552.88. A male of the same age would get $16,393.44. Throughout the life of their policy, they would still have access to 85% of the cash value of their initial deposit in case of emergency. The younger one does this, the greater the return - a 50 year-old would get $28,490.03 for the same $10,000. My point is this: besides the obvious uses for life insurance, there are many other usage factors to think about. Life insurance can be used for replacing a stream of income, providing heirs with liquidity when they need it most, replacing the value of an asset, paying estate taxes, maximizing your pension or Social Security benefits, funding college for the kids and grandkids, providing liquidity to an estate, buying out a business partner, protecting a business for the replacement value of a key employee, satisfying debt, funding charitable gifts, providing for a special needs child or adult, equalizing an inheritance, longevity planning, and balancing investment risk. The key is speaking to a professional who is capable of helping you navigate the sometimes-choppy waters and educating yourself on how to utilize life insurance as a tool instead of looking at it as just another expense. Photo ©iStockphoto.com/zimmytws Originally Posted at: https://www.moneytips.com/why-dont-more-people-have-life-insurance7 Top Reasons Why You Need Life Insurance5 Biggest Life Insurance MythsAccelerated Benefit Riders 101
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