Tag: government

What Is Austerity?

What Is Austerity?

Austerity policies are nothing new. But talk about them in the news has recently escalated. In response to its ongoing debt crisis, the Greek government is preparing to implement austerity measures aimed at helping the country regain its financial footing. If you didn’t major in economics or you have no clue what austerity means, read on to find out how this fiscal program works.

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Austerity: A Definition

Trust us, austerity isn’t as complicated as it sounds. Austerity is a type of economic policy that governments use to deal with budget deficits. A country faces a deficit whenever it’s using more money than it’s earning from tax dollars.

By taking on an austerity package, a government hopes to reign in its spending, improve the status of its economy and avoid defaulting on its unpaid debt. Governments usually take on austerity measures in order to appease their creditors. In exchange, these lenders agree to bail out countries and allow them to borrow more money.

If you look up the word austere in the dictionary, you’ll see that it means severe, grave, hard, solemn and serious. Indeed, austerity is nothing to joke about.

Austerity Measures

What Is Austerity?

Austerity plans normally involve increases in different taxes, (property taxes, income taxes, etc.) budget cuts or a push to incorporate both. Government workers could lose their jobs or see their wages and benefits either decline or become stagnant. Hiking up interest rates, adding travel bans and keeping prices at a fixed level could be other strategies put in place to reduce spending.

Naturally, austerity measures typically aren’t viewed in the best light because they mean that there might be fewer government programs available to the public. Aid for veterans and low-income families, healthcare coverage and pensions are some of the benefits that normally take a hit when a country’s using an austerity package. Government services that aren’t eliminated might not be as comprehensive or as beneficial as they once were.

As you can see, in an austere environment, conditions are tighter overall. Historically, austerity has been implemented in the US during tough times including World War I, World War II and the Great Recession of 2008.

Greece’s new austerity package – which government lawmakers finally accepted in July 2015 – will feature less government funding, higher taxes and cuts to pension plans. As a result of this deal, the country was allowed to begin talks with its creditors about a third bailout.

Related Article: All About the Greek Debt Crisis

The Problems With Government Austerity 

Experts on the economy tend to go back and forth about how effective austerity can be. Some believe that instead of turning to austerity, the government should pump out more money and borrow as much as possible if an economy is on the rocks.

From a political standpoint, austerity is often controversial and results in riots and demonstrations. Anti-austerity protests erupted in Greece, where quite a few folks say that past austerity programs have only made social and economic conditions worse.

Beyond slowing down the economy, an austerity bill can cause a country to remain in its debt crisis, particularly if it’s in the midst of a recession. As fiscal austerity decreases spending, GDP can go down while unemployment goes up. Consumers can get nervous and stop spending and investing their own money.

In short, austerity policies can make life even more difficult for people who are already struggling. That’s why governments tend to turn to them as a last resort if other strategies aren’t working.

Why Austerity Might Not Be So Bad

What Is Austerity?

Notable European creditors have argued that austerity can be beneficial to a country’s long-term economic state. For instance, the International Monetary Fund (IMF) has previously reported that austerity has done more damage than anticipated. But the European Central Bank released a paper saying that austerity has been helpful, at least for some of the weaker eurozone countries.

In fact, austerity has helped strengthen the economies in European countries like Latvia and Iceland. Although Spain’s unemployment remains high, its economy is in better shape overall. Ireland has made considerable progress as well toward rebuilding its economy.

Proponents of austerity policies say that they can make investors feel more optimistic when a country is being run more responsibly. Austerity has the potential to bring a shrinking economy back to life as everyday citizens invest in the private sector instead of relying on support from the federal government.

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The US used austerity measures between 2010 and 2014. Not only were our policies harsher than those employed by the governments in the UK and other European nations, but our economy fared better than theirs.

The Takeaway

The point of austerity is to tighten the government’s belt, bring a country’s debt back down to a more manageable level and stimulate an economy that has stopped growing. Countries generally try to meet these goals by cutting spending and raising taxes.

The debate over whether austerity works continues but one common theme has emerged. Timing matters. Some critics suggest that cutting too much too quickly during a recession can be painful. When introduced more slowly, however, (or when the economy is doing very well,) austerity measures can turn things around.

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The post What Is Austerity? appeared first on SmartAsset Blog.

Source: smartasset.com

Is Your Mortgage Forbearance Ending Soon? What To Do Next

mortgage forbearanceSEAN GLADWELL / Getty Images

Millions of Americans struggling to make their monthly mortgage payments because of COVID-19 have received relief through the Coronavirus Aid, Relief, and Economic Security Act.

But mortgage forbearance is only temporary, and set to expire soon, leaving many homeowners who are still struggling perplexed on what to do next.

Enacted in March, the CARES Act initially granted a 180-day forbearance, or pause in payments, to homeowners with mortgages backed by the federal government or a government-sponsored enterprise such as Fannie Mae or Freddie Mac. Furthermore, some private lenders also granted mortgage forbearance of 90 days or more to financially distressed homeowners.

According to the Mortgage Bankers Association, 8.39% of loans were in forbearance as of June 28, representing an estimated 4.2 million homeowners nationwide.

So what are affected homeowners to do when the forbearance goes away? You have options, so it’s well worth contacting your lender to explore what’s best for you.

“If you know you’re going to be unable to meet the terms of your forbearance agreement at its maturity, you should call your loan servicer immediately and see what options they may be able to offer to you,” says Abel Carrasco, mortgage loan originator at Motto Mortgage Advisors in St. Petersburg, FL.

Exactly what’s available depends on the fine print in the terms of your mortgage forbearance agreement. Here’s an overview of some possible avenues to explore if you still can’t pay your mortgage after the forbearance period ends.

Extend your mortgage forbearance

One simple option is to contact your lender to request an extension.

Homeowners granted forbearance under the CARES Act can request a 180-day extension, giving them a total of 360 days of forbearance, according to the Consumer Financial Protection Bureau.

The key is to contact your lender well before your forbearance expires. If you let it expire without an extension, your lender could impose penalties.

“If you just stop making regular, scheduled payments, you could have a late mortgage payment on your credit,” warns Carrasco. “That could severely impact refinancing or purchasing another property in the immediate future and potentially subject you to foreclosure.”

Keep in mind, though, a forbearance simply delays payments, meaning they’ll still need to be made in the future. It doesn’t mean payments are forgiven.

Refinance to lower your mortgage payment

Mortgage interest rates are at all-time lows, hovering around 3%. So if you can swing it, this may be a great time to refinance your home, says Tendayi Kapfidze, chief economist at LendingTree.

Refinancing could come with some hefty fees, however, ranging from 2% to 6% of your loan amount. But it could be worth it.

A lower interest rate will likely lower your monthly payment and save you thousands over the life of your mortgage. Dropping your interest rate from 4.125% to 3% could save more than $40,000 over 30 years, for example, according to the Consumer Financial Protection Bureau.

“Lenders have tightened standards, though, so you will need to show that you are a good candidate for refinancing,” Kapfidze says. You’ll need a good credit score of 620 or higher.

As long as you’ve kept up your end of the forbearance terms, having a mortgage forbearance shouldn’t affect your credit score, or your ability to refinance or qualify for another mortgage.

Ask for a loan modification

Many lenders are offering an assortment of programs to help homeowners under hardship because of the pandemic, says Christopher Sailus, vice president and mortgage product manager at WaFd Bank.

“Lenders quickly recognized the severity of the economic situation due to the pandemic, and put programs into place to defer payments or help reduce them,” he says.

A loan modification is one such option. This enables homeowners at risk of default to change the terms of their original mortgage—such as payment amount, interest rate, or length of the loan—to reduce monthly payments and clear up any delinquencies.

Loan modifications may affect your credit score, but not as much as a foreclosure. Some lenders charge fees for loan modifications, but others, like WaFd, provide them at no cost.

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Watch: 5 Things to Know About Selling a Home Amid the Pandemic

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Put your home on the market

It may seem like a strange time to sell your home, with COVID-19 cases growing, unemployment rising, and the economy on shaky ground. But, it’s actually a great time to sell a house.

Pending home sales jumped 44.3% in May, according to the National Association of Realtors®’ Pending Home Sales Index, the largest month-over-month growth since the index began in 2001.

Home inventory remains low, and buyer demand is up with many hoping to jump on the low interest rates. Prices are up, too. The national median home price increased 7.7% in the first quarter of 2020, to $274,600, according to NAR.

So if you can no longer afford your home and have plenty of equity built up, listing your home may be a smart move. (Home equity is the market value of your home minus how much you still owe on your mortgage.)

Consider foreclosure as a last resort

Foreclosure may be the only option for many homeowners, especially if you fall too behind on your mortgage payments and can’t afford to sell or refinance. In May, more than 7% of mortgages were delinquent, a 20% increase from April, according to mortgage data and analytics firm Black Knight.

“When to begin a foreclosure process will vary from lender to lender and client to client,” Sailus says. “Current and future state and federal legislation, statutes, or regulations will impact the process, as will the individual homeowner’s situation and their ability to repay.”

Foreclosures won’t begin until after a forbearance period ends, he adds.

The CARES Act prohibited lenders from foreclosing on mortgages backed by the government or government-sponsored enterprise until at least Aug. 31. Several states, including California and Connecticut, also issued temporary foreclosure moratoriums and stays.

Once these grace periods (and forbearance timelines) end, and homeowners miss payments, they could face foreclosure, Carrasco says. When a loan is flagged as being in foreclosure, the balance is due and legal fees accumulate, requiring homeowners to pay off the loan (usually by selling) and vacating the property.

“Absent participation in an agreed-upon forbearance, deferment, repayment plan, or loan modification, loan servicers historically may begin the foreclosure process after as few as three months of missed mortgage payments,” he explains. “This is unfortunately often the point of no return.”

The post Is Your Mortgage Forbearance Ending Soon? What To Do Next appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

Tips And Services To Help Your Bookkeeping Go Paperless

The COVID-19 pandemic wasn’t a catalyst to shift businesses toward digital transformation, it merely sped up the process. Businesses needed to scramble to move much of their operations online so workers could efficiently collaborate with each other and maintain business continuity during a difficult time.

Fortunately, departments not traditionally associated with the digital universe, like Bookkeeping, had an easier time adapting thanks to online services like Bookstime.com, a provider of digital bookkeeping tools with unique experience in difficult areas like sales tax automation, health benefits administration, and more.

Advantages of digital bookkeeping

Keeping track of every business transaction is among the most important and perhaps underappreciated tasks. Failure to keep track of transactions in a professional manner can result in a business owner making wrong decisions because they have inaccurate information.

Even worse, they might think they end the year with a profit but in reality, a bunch of small bookkeeping mistakes over several months means the business owner really lost money.

A shift to a digital platform eliminates these concerns. Online digital platforms make use of the most up-to-date accounting automation software that erases nearly every careless mistake. This is especially useful for a business owner who does the tedious but necessary job of bookkeeping themselves to save money. The more time a business owner spends on ancillary tasks, the less time they have to generate revenue and keep clients happy.

Some of the other advantages associated with going online include:

  • Eliminating clutter: keeping a clean home office is challenging enough but a digital platform means more space for higher priority files.
  • Save time: A digital bookkeeping platform is always available online with a few short clicks of the mouse. It can be accessed as needed and when needed in a few short seconds.
  • Environmental benefits: It isn’t unusual for a company to use at least 10,000 sheets of paper each year. Shifting resources online may seem like a small benefit but everyone has a responsibility to do a little bit more to protect our environment.

Case in point: Fill in a W-4

Every business owner is happy to hire new workers because it means they are expected to provide value to the company above and beyond their salary. But that doesn’t mean that the formal process is enjoyable.

One of the more undesirable parts of the hiring process is the pesky W-4 form that every employer has to ensure is properly filled in before a worker’s first day. Simply put, the W-4 form confirms how much income tax a worker wants to have withheld from their recurring paychecks. Under-withholding taxes means a worker will likely experience a shock come tax season as they owe money to the government. Over-withholding taxes means a worker is paying the government too much money and has to wait for a refund.

Digital bookkeeping can help simplify this process so you're less prone to errors. When other people’s finances are at stake, small careless mistakes could impact a worker’s desire to give the business owner 100% of their focus.

Businesses that shifted their bookkeeping process online to better navigate through the pandemic quickly realized this was a move that should have been done years ago. The advantages of having access to a clean and organized online tool far outweigh the costs.

Source: quickanddirtytips.com

10 Financial Steps to Take Before Having Kids

According to the U.S. Department of Agriculture (USDA), raising a child to the age of 18 sets families back an average of $233,610, and that’s for each child. This figure doesn’t even include the cost of college, which is growing faster than inflation. 

CollegeBoard data found that for the 2019-2020 school year, the average in-state, four-year school costs $21,950 per year including tuition, fees, and room and board. 

Kids can add meaning to your life, and most parents would say they’re well worth the cost. But having your financial ducks in a row — before having kids — can help you spend more time with your new family instead of worrying about paying the bills.

10 Financial Moves to Make Before Having Kids

If you want to have kids and reach your long-term financial goals, you’ll need to make some strategic moves early on. There are plenty of ways to set yourself up for success, but here are the most important ones. 

1. Start Using a Monthly Budget

When you’re young and child-free, it’s easy to spend more than you planned on fun activities and nonessentials. But having kids has a way of ruining your carefree spending habits, and that’s especially true if you’ve spent most of your adult life buying whatever catches your eye.

That’s why it’s smart to start using a monthly budget before having kids. It helps you prioritize each dollar you earn every month so you’re tracking your family’s short- and long-term goals.

You can create a simple budget with a pen and paper. Each month, list your income and recurring monthly expenses in separate columns, and then log your purchases throughout the month. This gives you a high-level perspective about money going in and out of your budget. You can also use a digital budgeting tool, like Mint, Qube Money, or You Need a Budget (YNAB) to get a handle on your finances. 

Regardless of which budgeting tool you choose, create categories for savings (e.g. an emergency fund, vacation fund, etc.) and investments. Treat these expense categories just like regular bills as a way to commit to your family’s money goals. Your budget should provide a rough guide that helps you cover household expenses and save for the future while leaving some money for fun.

2. Build an Emergency Fund

Most experts suggest keeping three- to six-months of expenses in an emergency fund. Having an emergency fund is even more crucial when you have kids. You never know when you’ll face a broken arm, requiring you to cover your entire health care deductible in one fell swoop. 

It’s also possible your child could be born with a critical medical condition that requires you to take time away from work. And don’t forget about the other emergencies you can face, from a roof that needs replacing to a job loss or income reduction. 

Your best bet is opening a high-yield savings account and saving up at least three months of expenses before becoming a parent. You’ll never regret having this money set aside, but you’ll easily regret not having savings in an emergency.

3. Boost Your Retirement Savings Percentage

Your retirement might be decades away, but making retirement savings a priority is a lot easier when you don’t have kids. And with the magic of compound interest that lets your money grow exponentially over time, you’ll want to get started ASAP. 

By boosting your retirement savings percentage before having kids, you’ll also learn how to live on a lower amount of take-home pay. Try boosting your retirement savings percentage a little each year until you have kids. 

Go from 6% to 7%, then from 8% to 9%, for example. Ideally, you’ll get to the point where you’re saving 15% of your income or more before becoming a parent. If you’re already enrolled in an employer-sponsored retirement plan, this change can be done with a simple form. Ask your employer or your HR department for more information.

If you’re self-employed, you can still open a retirement account like a SEP IRA or Solo 401(k) and begin saving on your own. You can also consider a traditional IRA or a Roth IRA, both of which let you contribute up to $6,000 per year, or $7,000 if you’re ages 50 or older. 

4. Start a Parental Leave Fund

Since the U.S. doesn’t mandate paid leave for new parents, check with your employer to find out how much paid time off you might receive. The average amount of paid leave in the U.S. is 4.1 weeks, according to a study by WorldatWork, which means you might face partial pay or no pay for some weeks of your parental leave period. It all depends on your employer’s policy and how flexible it is.

Your best bet is figuring out how much time you can take off with pay, and then creating a plan to save up the income you’ll need to cover the rest of your leave. Let’s say you have four weeks of paid time off, but plan on taking 10 weeks of parental leave, for example. Open a new savings account and save weekly or monthly until you have six weeks of pay saved up. 

If you have six months to wait for the baby to arrive and you need $6,000 saved for parental leave, you could strive to set aside $1,000 per month for those ten weeks off. If you’re able to plan earlier, up to 12 months before the baby arrives, then you can cut your monthly savings amount and set aside just $500 per month.

5. Open a Health Savings Account (HSA)

A health savings account (HSA) is a tax-advantaged way to save up for health care expenses, including the cost of a hospital stay. This type of account is available to Americans who have a designated high-deductible health insurance plan (HDHP), meaning a deductible of at least $1,400 for individuals and at least $2,800 for families. HDHPs must also have maximum out-of-pocket limits below $6,900 for individuals and $13,800 for families. 

In 2020, individuals can contribute up to $3,550 to an HSA while families can save up to $7,100. This money is tax-advantaged in that it grows tax-free until you’re ready to use it. Moreover, you’ll never pay taxes or a penalty on your HSA funds if you use your distributions for qualified health care expenses. At the age of 65, you can even deduct money from your HSA and use it however you want without a penalty. 

6. Start Saving for College

The price of college will only get worse over time. To get a handle on it early and plan for your future child’s college tuition, start saving for their education in a separate account.  Once your child is born, you can open a 529 college savings account and list your child as its beneficiary. 

Some states offer tax benefits for those who contribute to a 529 account. For example, Indiana offers a 20% tax credit on up to $5,000 in 529 contributions each year, which gets you up to $1,000 back from the state at tax time. Many plans also let you invest in underlying investments to help your money grow faster than a traditional savings account. 

7. Pay Off Unsecured Debt

If you have credit card debt, pay it off before having kids. You’re not helping yourself by spending years lugging high-interest debt around. Paying off debt can free-up cash and save you thousands of dollars in interest every year. 

If you’re struggling to pay off your unsecured debt, there are several strategies to consider. Here are a few approaches:

Debt Snowball

This debt repayment approach requires you to make a large payment on your smallest account balance and only the minimum amount that’s due on other debt. As the months tick by, you’ll focus on paying off your smallest debt first, only to “snowball” the payments from fully paid accounts toward the next smallest debt. Eventually, the debt snowball should leave you with only your largest debts, then one debt, and then none.

Debt Avalanche

The debt avalanche is the opposite of the debt snowball, asking you to pay off the debt with the highest interest rate first, while paying the minimum payment on other debt. Once that account is fully paid, you’ll “avalanche” those payments to the next highest-rate debt. Eventually, you’ll only be left with your lowest-interest account until you’ve paid off all of your debt. 

Balance Transfer Credit Card

Another popular strategy involves transferring high-interest balances to a balance transfer credit card that offers 0% APR for a limited time. You might have to pay a balance transfer fee (often 3% to 5%), but the interest savings can make this strategy worth it.

If you try this strategy, make sure you have a plan to pay off your debt before your introductory offer ends. If you have 15 months at 0% APR, for example, calculate how much you need to pay each month for 15 months to repay your entire balance during that time. Any debt remaining after your introductory APR period ends will start accruing interest at the regular, variable interest rate. 

8. Consider Refinancing Other Debt

Ditching credit card debt is a no-brainer, but debt like student loans or your home mortgage can also weigh on your future family’s budget.

If you have student loan debt, look into refinancing your student loans with a private lender. A student loan refinance can help you lower the interest rate on your loans, find a manageable monthly payment, and simplify your repayment into one loan.

Private student loan rates are often considerably lower than rates you can get with federal loans — sometimes by half. The caveat with refinancing federal loans is that you’ll lose out on government protections, like deferment and forbearance, and loan forgiveness programs. Before refinancing your student loans, make sure you won’t need these benefits in the future. 

Also look into the prospect of refinancing your mortgage to secure a shorter repayment timeline, a lower monthly payment, or both. Today’s low interest rates have made mortgage refinancing a good deal for anyone who took out a mortgage several years ago. Compare today’s mortgage refinancing rates to see how much you can save. 

9. Buy Life Insurance

You should also buy life insurance before having kids. Don’t worry about picking up an expensive whole life policy. All you need is a term life insurance policy that covers at least 10 years of your salary, and hopefully more.

Term life insurance is extremely affordable and easy to buy. Many providers don’t even require a medical exam if you’re young and healthy. 

Once you start comparing life insurance quotes, you’ll be shocked at how affordable term coverage can be. With Bestow, for example, a thirty-year-old woman in good health can buy a 20-year term policy for $500,000 for as little as $20.41 per month. 

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10. Create a Will

A last will and testament lets you write down what should happen to your major assets upon your death. You can also state personal requests in writing, like whether you want to be kept on life support, and how you want your final arrangements handled.

A will can also formally define who you’d like to take over custody of your kids, if both parents die. If you don’t formally make this decision ahead of time, these deeply personal decisions might be left to the courts.

Fortunately, it’s not overly expensive to create a last will and testament. You can meet with a lawyer who can draw one up, or you can create your own using a platform like LegalZoom.

The Bottom Line

Having kids can be the most rewarding part of your life, but parenthood is far from cheap. You’ll need money for expenses you might’ve never considered before — and the cost of raising a family only goes up over time.

That’s why getting your money straightened out is essential before kids enter the picture. With a financial plan and savings built up, you can experience the joys of parenthood without financial stress.

The post 10 Financial Steps to Take Before Having Kids appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

The Highest Paying Trade Jobs On the Market

Pursuing a four-year degree or higher isn’t for everyone. If you fall into that group, it doesn’t mean you can’t get a high-paying job. There are a surprising number of trade jobs that pay salaries at or above careers that require a four-year degree. They pay well because they’re in demand and are expected to grow for the foreseeable future.

To earn that kind of money, you’ll need to land one of the best trade jobs. And while they may not require a four-year degree, most do require some type of specialized education, typically an associate’s degree (which you can often get from an online college). That has a lot of advantages by itself, because a two-year education is a lot less expensive than a full four-year program.

I covered the best jobs with no college degree previously, and this post is specifically about trade jobs. Choose one that interests you – and fits within your income expectations – then read the description for it. I’ve given you the requirements to enter the trade, the income, working conditions, employment projections and any required education. After reading this guide, you’ll already be on your way to your new career!

Benefits of Pursuing Trade Jobs

For a lot of young people, going to a four-year college is the default choice. But when you see how well the trade jobs pay, and how much less education they require, I think you’ll be interested.

Apart from income, here are other benefits to the best trade jobs:

  • You’ll need only a two-year degree or less, so you’ll save tens of thousands of dollars on your education.
  • You’ll graduate and begin earning money in half as much time as it will take you to complete a four-year degree.
  • Since trade jobs are highly specialized, you’ll mainly be taking courses related to the job, and less of the general courses that are required with a four-year degree.
  • Some schools provide job placement assistance to help you land that first position.
  • Since most of these jobs are in strong demand, the likelihood of finding a job quickly after graduation is very high.

Still another major benefit is geographic mobility, if that’s important to you. Since the best trade jobs are in demand virtually everywhere in the country, you’ll be able to choose where you want to live. Or if life takes one of those strange turns – that it tends to do – you’ll be able to make a move easily without needing to worry about finding a job. There’s an excellent chance one will be waiting for you wherever you go.

The Best Paying Trade Jobs

The table below shows some of the highest paying trades you can enter without a bachelor’s degree or higher. However, most do require at least an associate’s degree (AA) or equivalent education. Not surprisingly, occupations in the medical field are the most common.

The salary indicated is the median for the entire country. But there are large differences from one area of the country to another. Salary information is taken from the US Bureau of Labor Statistics, Occupational Outlook Handbook.

Trade Median Salary Education Requirement
Air traffic controllers $122,990 AA or BS from Air Traffic Collegiate Training Initiative Program
Radiation therapists $85,560 AA degree
Nuclear technicians (nuclear research and energy) $82,080 AA degree
Nuclear medicine technologists $77,950 AA degree
Dental hygienists $76,220 AA degree
Web developers $73,760 AA degree
Diagnostic medical sonographers $68,750 AA degree
MRI technologists $62,280 AA degree
Paralegals $51,740 AA degree
Licensed practical nurses $47,480 AA degree or state approved educational program

The table doesn’t list other common trades, like electricians, plumbers, elevator repair techs, welders or mechanics. To enter those fields you’ll usually need to participate in an apprentice program sponsored by an employer, though there may be certain courses you’ll need to complete.

The Best Trade Jobs in Detail

The table above summarized the best trade jobs, as well as the median salary and the basic educational requirements. Below is additional information specific to each job – and more important – why it’s a career worth considering.

Air Traffic Controller

Air traffic controllers coordinate aircraft both on the ground and in the air around airports. They work in control towers, approach control facilities or route centers. The pay is nearly $123,000 per year, and the job outlook is stable.

Education/Training Required: You’ll need at least an associate’s degree, and sometimes a bachelor’s degree, that must be issued by the Air Traffic Collegiate Training Initiative Program. There are only 29 colleges across the country that offer the program. Some of the more recognizable names include Arizona State University, Kent State University, Purdue University, Southern New Hampshire University (SHNU), and the University of Oklahoma.

Job Challenges: The limited number of colleges offering the program may be inconvenient for you. The job also requires complete concentration, which can be difficult to maintain over a full shift. You’ll also be required to work nights, weekends, and even rotating shifts. And since the pay is high and demand for air traffic controllers expected to be flat over the next few years, there’s a lot of competition for the positions.

Why you may want to become an air traffic controller:

  • The pay is an obvious factor – it’s much higher than most jobs that require a bachelor’s degree.
  • You have a love for aviation and want to be in the middle of where the action is.
  • Jobs are available at small private and commercial airports, as well as major metropolitan airports.

Radiation Therapists

Radiation therapists are critical in the treatment of cancer and other diseases that require radiation treatments. The work is performed mostly in hospitals and outpatient centers, but can also be in physician offices. Income is well over $85,000 per year, and the field is expected to grow by 9% over the next decade, which is faster than average for the job market at large.

Education/Training Required: You’ll need either an associate’s or bachelor’s degree in radiation therapy, and licensing is required in most states. That usually involves passing a national certification exam.

Job Challenges: You’ll be working largely with cancer patients, so you’ll need a keen sensitivity to the patient’s you’re working with. You’ll need to be able to explain the treatment process and answer questions patients might have. There may also be the need to provide some degree of emotional support. Also, if you’re working in a hospital, the position may involve working nights and weekends.

Why you may want to become a radiation therapist:

  • You have a genuine desire to help in the fight against cancer.
  • The medical field offers a high degree of career and job stability.
  • The position pays well and typically comes with a strong benefits package.

Nuclear Technicians

Nuclear technicians work in nuclear research and energy. They provide assistance to physicists, engineers, and other professionals in the field. Work will be performed in offices and control rooms of nuclear power plants, using computers and other equipment to monitor and operate nuclear reactors. The pay level is about $82,000 per year, and job growth is expected to be slightly negative.

Education/Training Required: You’ll need an associate’s degree in nuclear science or a nuclear related technology. But you’ll also need to complete extensive on-the-job training once you enter the field.

Job Challenges: There is some risk of exposure to radiation, though all possible precautions are taken to keep that from happening. And because nuclear power plants run continuously, you should expect to do shift work that may also include a variable schedule. The biggest challenge may be that the field is expected to decline slightly over the next 10 years. But that may be affected by public attitudes toward nuclear energy, especially as alternative energy sources are developed.

Why you may want to become a nuclear technician:

  • You get to be on the cutting edge of nuclear research.
  • Compensation is consistent with the better paying college jobs, even though it requires only half as much education.
  • There may be opportunities to work in other fields where nuclear technician experience is a job requirement.
  • It’s the perfect career if you prefer not dealing with the general public.

Nuclear Medicine Technologists

Nuclear medicine technologists prepare radioactive drugs that are administered to patients for imaging or therapeutic procedures. You’ll typically be working in a hospital, but other possibilities are imaging clinics, diagnostic laboratories, and physician’s offices. The position pays an average of $78,000 per year, and demand is expected to increase by 7% over the next decade.

Education/Training Required: You’ll need an Associates degree from an accredited nuclear medicine technology program. In most states, you’ll also be required to become certified.

Job Challenges: Similar to radiation therapists, you’ll need to be sensitive to patient needs, and be able to explain procedures and therapies. If you’re working in a hospital, you may be required to work shifts, including nights, weekends, and holidays.

Why you may want to become a nuclear medicine technologist:

  • You have a strong desire to work in the healthcare field, participating in the healing process.
  • Nuclear medicine technologists are in demand across the country, so you can choose your location.
  • The field has an unusual level of job stability, as well as generous compensation and benefits.

Dental Hygienist

Dental hygienists provide dental preventative care and examine patients for various types of oral disease. They work almost entirely in dentists offices, and can be either full-time or part-time. The annual income is over $76,000, and the Bureau of Labor Statistics projects a healthy 11% growth rate over the next decade.

Education/Training Required: An associate’s degree in dental hygiene, though it usually takes three years to complete rather than the usual two. Virtually all states require dental hygienists to be licensed, though requirements vary by state.

Job Challenges: You’ll need to be comfortable working in people’s mouths, some of whom may have extensive gum disease or poor dental hygiene. But you also need to have a warm bedside manner. Many people are not comfortable going to the dentist, let alone having their teeth cleaned, and you’ll need to be able to keep them calm during the process.

Why you may want to become a dental hygienist:

  • Dental hygienists have relatively regular hours. Though some offices may offer early evening hours and limited Saturday hours, you’ll typically be working during regular business hours only.
  • You can work either full-time or part-time. Part-time is very common, as well as rewarding with an average hourly pay of $36.65.
  • Dental hygienists can work anywhere there’s a dental office, which is pretty much everywhere in the Western world.

Web Developers

Web developers design and create websites, making the work a nice mix of technical and creative. They work in all types of environments, including large and small companies, government agencies, small businesses, and advertising agencies. Some are even self-employed. With an average annual income of nearly $74,000, jobs in the field are expected to grow by 13% over the next decade. That means web developers have a promising future.

Education/Training Required: Typically an associates degree, but that’s not hard and fast. Large companies may require a bachelor’s degree, but it’s also possible to enter the field with a high school diploma and plenty of experience designing websites. It requires a knowledge of both programming and graphic design.

Job Challenges: You’ll need the ability to concentrate for long stretches, as well as to follow through with both editing and troubleshooting of the web platforms you develop. Good customer service skills and a lot of patience are required, since employers and clients are given to change direction, often with little notice.

Why you may want to become a web developer:

  • It’s an excellent field for anyone who enjoys working with computers, and has a strong creative streak.
  • Web designers are needed in just about every area of the economy, giving you a wide choice of jobs and industries, as well as geographic locations.
  • This is one occupation that can lead to self-employment. It can be done as a full-time business, but it can also make the perfect side hustle.

Diagnostic Medical Sonographers

Diagnostic medical sonographers operate special imaging equipment designed to create images for aid in patient diagnoses. Most work in hospitals where the greatest need is, but some also work in diagnostic labs and physician’s offices. The pay is nearly $69,000 per year, and the field is expected to expand by 14%, which is much faster than the rest of the job market.

Education/Training Required: Most typically only an associate’s degree in the field, or at least a postsecondary certificate from a school specializing in diagnostic medical sonography.

Job Challenges: Similar to other health related fields, you’ll need to have a calm disposition at all times. Many of the people you’ll be working with have serious health issues, and you may need to be a source of comfort while you’re doing your job. You’ll need to develop a genuine compassion for the patients you’ll be working with.

Why you may want to become a diagnostic medical sonographer

  • The field has an exceptionally high growth rate, promising career stability.
  • As a diagnostic medical sonographer, you’ll be able to find work in just about any community you choose to live in.
  • It’s an opportunity to earn a college level income with just a two-year degree.

MRI Technologists

As an MRI technologist, you’ll be performing diagnostic imaging exams and operating magnetic resonance imaging scanners. About half of all positions are in hospitals, with the rest employed in other healthcare facilities, including outpatient clinics, diagnostic labs, and physician’s offices. The average pay is over $62,000 per year, and the field is expected to grow by 9% over the next 10 years.

Education/Training Required: You’ll need an associate’s degree in MRI technology, and even though very few states require licensing, employers often prefer candidates who are. MRI technologists often start out as radiologic technologists, eventually transitioning into MRI technologists.

Job Challenges: Similar to other healthcare occupations, you’ll need to have both patience and compassion in working with patients. You’ll also need to be comfortable working in windowless offices and labs during the workday.

Why you may want to become an MRI technologist:

  • With more than 250,000 jobs across the country, you’re pretty much guaranteed of finding work on your own terms.
  • You’ll typically be working regular business hours, though you may do shift work and weekends and holidays if you work at a hospital.
  • Solid job growth means you can look forward to career stability and generous benefits.

Paralegals

Paralegals assist lawyers, mostly by doing research and preparing legal documents. Client contact can range between frequent and nonexistent, depending on the law office you’re working in. But while most paralegals do work for law firms, many are also employed in corporate legal departments and government agencies. The position averages nearly $52,000 per year and is expected to grow by 12% over the next 10 years.

Education/Training Required: Technically speaking there are no specific education requirements for a paralegal. But most employers won’t hire you unless you have at least an associate’s degree, as well as a paralegal certification.

Job Challenges: You’ll need to have a willingness to perform deep research. And since you’ll often be involved in preparing legal documents, you’ll need a serious eye for detail. You’ll also need to be comfortable with the reality that much of what takes place in a law office involves conflict between parties. You may find yourself in the peacemaker role more than occasionally. There’s also a strong variation in pay between states and even cities. For example, while average pay in Washington DC is over $70,000 per year, it’s only about $48,000 in Tampa.

Why you may want to become a paralegal:

  • There are plenty of jobs in the field, with more than 325,000. That means you’ll probably be able to find a job anywhere in the country.
  • You’ll have a choice of work environments, whether it’s a law office, large company, or government agency.
  • You can even choose the specialization since many law firms work in specific niches. For example, one firm may specialize in real estate, another in family law, and still another in disability cases.

Licensed Practical Nurses

Licensed practical nurses provide basic nursing care, often assisting registered nurses. There are more than 700,000 positions nationwide, and jobs are available in hospitals, doctor’s offices, nursing homes, extended care facilities, and even private homes. With an average pay level of over $47,000 per year, the field is expected to grow by 11% over the next decade.

Education/Training Required: At a minimum, you’ll need to complete a state approved LPN education program, which will take a year to complete. But many employers prefer candidates to have an associate’s degree, and will likely pay more if you do. As medical caregivers, LPNs must also be licensed in all states.

Job Challenges: As an LPN, just as is the case with registered nurses, you’ll be on the front line of the healthcare industry. That means constant contact with patients and family members. You’ll need to be able to provide both care and comfort to all. If you’re working in a hospital, nursing home, or extended care facility, you’ll be doing shift work, including nights and weekends.

Why you may want to become a licensed practical nurse:

  • With jobs available at hospitals and care facilities across the country, you’ll have complete geographic mobility as well as a choice of facilities.
  • You may be able to parlay your position into registered nursing by completing the additional education requirements while working as an LPN.
  • Though most positions are full-time, it may be possible to get a part-time situation if that’s your preference.

Start On Your Career Path by Enrolling in a Trade School

If you want to enter any of the trades above, or one of the many others that also have above average pay and opportunity, you’ll need to enroll in a trade school. However, in many cases it will be better to get the necessary education – especially an associate’s degree – at a local community college. Not only are they usually the least expensive places to get higher education, but there’s probably one close to your home.

Steps to enrolling in a trade school

Whether you go to a community college, a trade school, or enroll in a certificate program, use the following strategy:

  1. Develop a short list of the schools you want to attend to give yourself some choices.
    Make sure any school you’re considering is accredited.
  2. Do some digging and make sure the school you want to attend has a job placement office with a solid record of success.
  3. Complete an application form with the school, but be sure to do it well in advance of the beginning of the semester or school year.
  4. Apply for any financial aid that may be available. You can use the tool below to get started.
  5. Consider whether you want to attend on a full-time or part-time basis. Full-time will be quicker, but part-time will enable you to earn money while you’re getting your certificate or degree, as well as spread the cost of your schooling over several years.

Tax credits can help you afford your education

Even if you don’t qualify for financial aid, the government may still be able to help by providing tax credits. Tax credits can be even better than tax deductions, because they provide a direct reduction of your tax liability.

For example, the American Opportunity Credit is available for students for qualified education expenses paid for the first four years of higher education. The credit is $2,500 per year, covering 100% of the first $2,000 in qualified education expenses, plus 25% of the next $2,000.

Another credit is the Lifetime Learning Credit. It’s a credit for tuition and other education expenses paid for courses taken to acquire or improve job skills, including formal degree programs. The credit is worth up to $2,000 per tax return, based on 20% of education expenses up to $10,000 paid.

What to watch out for when looking for trade schools

When choosing a trade school it pays not to be too trusting. While that shouldn’t be a problem with community colleges, since they’re publicly accredited, there are a large number of for-profit trade schools that are not only expensive, but they often don’t have the best reputations. That isn’t to say all for-profit schools are scam artists, but the possibility is real.

Make sure the school is accredited by your state.
Don’t rely on assurances by the school that they’re accredited by some poorly known and totally unrecognized industry trade group.

Check out the school with reliable third-party sources.
This can include your state Department of Education, the Better Business Bureau, and even reviews on Yelp or other social media sites. If the school has burned others, you could be a future victim.

Interview people already working in your chosen field.
They’re likely to know which schools are legitimate, and which have a less than savory reputation.

Don’t ignore cost!
Don’t pay $30,000 at a for-profit school when you can get the same education for half as much at a community college. This will be even more important if you will be using student loans to pay for your education. Overpaying for school means you’ll be overpaying on your student loan.

How We Found the Best Trade Jobs of 2021

Just so you know our list of the best trade jobs isn’t just our opinion, we used the following methodology in including the occupations we did:

  • The occupations frequently appear on published lists of “the best jobs without a college degree”.
  • We focused on those occupations that appeared frequently across several lists.
  • We specifically chose fields that could best be considered semi-professional. That means that while they don’t require a four-year degree or higher, they do require at least some form of education, and in most cases, a certification. We consider this an important criteria, because career fields with a low entry bar can easily become saturated, forcing pay levels down.
  • As the table at the beginning of this guide discloses, statistical information for each of these occupations was obtained from the US Bureau of Labor Statistics, Occupational Outlook Handbook.

Summary: The Best Trade Jobs

If you’re a high school student, a recent high school graduate, or you’re already in the workforce and looking to make a career change, take a close look at these trade jobs. They pay salaries comparable to jobs that require a four-year college degree, but you can enter with just a two-year degree or less.

That will not only cut the time, cost, and effort in getting your education in half, but it will also enable you to begin earning high pay in only one or two years.

Pick the field that’s right for you, choose a reputable trade school or community college, then get started in time for the next semester.

The post The Highest Paying Trade Jobs On the Market appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Best Home Loans For Single Mothers

Affording to buy a house can be hard enough even as a couple. And for single mothers, unless they earn a high income, getting home loans is even harder.

Fortunately, there are home loans for single mothers out there. FHA loan, for example, is a good option for a single parent on a low income due to its low down payment and low score requirements.

If you are a single parent looking home loans, click here to get pre-approved.

The Down Payment: the hurdle for single mothers to get home loans

What makes it difficult for single mothers on a low income to get qualified for home loans is the down payment. The down payment for a conventional loan is 20% of the home purchase price.

For example, if you want to buy a house for $450,000, you will need to come up with $90,000. That is simply the down payment. Adding another 5% for closing cost brings you to $112,500.

Coming up with that kind of money is hard, if not impossible, considering the fact that you’re probably have other monthly expenses. Granted, you can get a conventional loan with smaller down payments (as low as 10 percent).

But the problem is you will have to pay much higher interest rates, including private mortgage insurance (PMI), which is an insurance that protects the lender in case you default on your loan.

Get started by comparing FHA loan rates, to find the best rates and terms that suit you.


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Fortunately, the government has created programs to help single mothers get home loans. For instance, FHA loans only require 3.5% down payment of the home purchase price.

To illustrate, suppose you’re looking to purchase a modest house for $100,000. For a 3.5% down payment, you will only need to come up with $3,500. This low down payment is indeed flexible for low income single mothers seeking home loans.

Best Home Loans For Single Mothers

1) FHA loans

Despite having a single source of income, there are home loans for single mothers out there. Indeed, FHA home loans are a popular choice for single mothers first time home buyers.

An FHA loan is a government loan insured by the Federal Housing Administration (hence, the acronym “FHA”).

The FHA down payment can be as low as 3.5% and the credit score can be at least 580 or higher. If your credit score falls between 500 to 579, then you will need to put at least 10% down.

To know if your credit score is at least 580, get a free credit score at CreditSesame.

Program assistance for the down payment

Even if the FHA down payment is this low, single mothers seeking home loans and those who are living paycheck to paycheck can still have a hard time to come up with that money. Fortunately there are solutions.

The Department of Housing and Urban Development (HUD), which manages the FHA loan program, has recently allowed the 3.5% down payment to come from a third party.

They can be a friend, a family member, or a employer. This is good news for a single parent, as it means that they don’t have to use their own money to get a home loan.

2) VA Loans

If you’re convinced that FHA loan is a good idea, then you’d love VA loans. VA loans help homebuyers to buy home with $0 down. In addition, there is no private insurance mortgage (PMI) and has a very low interest rate.

Check to see if you’re eligible with a VA Lender.

So if you’re a veteran or service members, you may be eligible. If you were or are in the army, marine corps, navy, Air force, Coast guard, or you are a spouse of a service member, you may be eligible.

Don’t meet these requirements? You may still be eligible; talk with a home loan specialist now.

The $0 down payment is what makes VA home loans attractive among single mothers. With VA home loans, qualified single mothers can finance 100 percent of the home’s purchase price with absolutely no money down.

The other benefit of a VA loan is that there is no PMI. That is because the government backs the loan and assumes the risk.

Looking for a VA loan quote? Speak with a VA Lender today.

The Bottom line…

Being a single mother on a low income can be tough. But that should not prevent you from buying a home you have always dreamed of. The good new is there are programs that help single mothers buy a home. And those programs are the FHA and VA loans.

Additional tips for single mothers seeking home loans:

  • The first step in securing a home loan is to shop and compare multiple mortgage rates to choose the best one.
  • The second step is to get pre-approved by a lender. This is known as the pre-qualification process. The loan officer will assess your situation and determine what you qualify for. Once you have an idea of how much you can afford, you can submit your application.

Related articles:

  • FHA Loan Requirements – Guidelines and Limits
  • 3 Things No One Ever Tells You About Buying a Home With a FHA Loan
  • How to Buy A Home With A Low Credit Score

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The post Best Home Loans For Single Mothers appeared first on GrowthRapidly.

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Student Loans vs. Financial Aid

A young woman stands outside in front of a green tree, holding her books and wearing a backpack, smiling off into the distance.

As of early 2020, student loan debt in the nation had reached more than $1.5 trillion. More than 44 million individuals have student loan debt, and the average person with student loans owes a bit over $32,000—which is more than half of the average household income in the United States. As a new school year approaches, more individuals are searching for ways to fund their education without going into debt for years. Luckily, student loans aren’t the only way to get help paying for college.

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Learn more about student loans vs. financial aid below,
and get some information about various ways to help fund your education.

Student Loans vs. Financial Aid: What’s the Difference?

Both student loans and financial aid can come from the federal government or the private sector. The main difference between student loans and financial aid is whether or not you need to pay back the money you are given. Student loans generally require that you pay back the loan with interest, while financial aid packages like scholarships and grants typically do not need to be paid back.

That distinction can make a big difference. “Every dollar you receive in scholarship or grant form is a dollar you don’t have to pay interest on,” says Zina Kumok, an editor at Dollar Sprout. And saving that money opens up possibilities after graduation, too. “Students who don’t have to take out as many loans will have more career options and afford to start their own businesses, work in lower-paying fields, or even take time off to travel abroad.”

But as with any financial agreement, make sure you
understand the terms upfront before signing anything. Not all financial aid
comes without strings.

How to Apply for Financial Aid

To qualify for federal loans and other types of federal financial aid, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). You might need to complete the FAFSA with some of your parents’ income information if you are still a dependent.

To apply for private loans and financial aid, you must
research the program in question and complete the appropriate application
process. For example, academic or extracurricular scholarships are often
offered by various colleges and universities. You’ll have to look on those
university websites or contact financial aid departments at various schools to
find out about how to apply to these programs. Scholarships offered by private
organizations will have their own processes as well.

Student Loans

Student loans provide credit extended to you or your parents for the purpose of paying for college. Student loans do have to be repaid, but typically not until you’re out of school. In some cases, such as if you’re going to work in certain public sectors, you might be able to apply for a student loan forgiveness program.

Subsidized and Unsubsidized Federal
Loans

When you apply with the FAFSA, you may find out you qualify for federal loans. Subsidized federal loans tend to have slightly better terms than unsubsidized loans. Another benefit of a subsidized loan is that the interest on it is covered by the Department of Education as long as you meet enrollment requirements. The amount you can borrow is limited, and interest rates range from 2.75 to 4.3%.

Learn more about federal student loans and economic protections from COVID-19: What You Need to Know about CARES, HEROES, and HEALS.

Private Student Loans

If you don’t qualify for federal student loans or want another option, you can apply for private student loans from commercial lenders. Whether you can get approved for these loans or get favorable terms and rates might depend on your credit score.

Don’t know your credit score? Sign up for ExtraCredit to find out.

Sign Up for ExtraCredit

Financial Aid

Financial aid
takes many forms, and most often does not need to be paid back after you
graduate. These types of aid can be offered by your school, other private
institutions, or the government. They are most often divided into needs-based
aid and merit-based aid.

When applying for
any type of financial aid, you will need to research the deadlines,
requirements, and payment specifics carefully.

Be wary of scholarship and other aid programs that charge fees. “Fees are a dead giveaway of scholarship scams,” says Doug Whiteman, editor-in-chief at MoneyWise.com. “Be very careful about handing over a credit card number or other personal information.”

Scholarships

Scholarships are awarded for need or merit, and they’re offered by a wide range of organizations. Schools, private businesses, local and national associations, religious organizations, and charities are all potential sources for scholarships. Most scholarships do not require you to pay them back.

“Students should be more aggressive about applying for scholarships,” says Kumok. Whiteman agrees, citing a recent New York Times article that estimates there are 44,000 private scholarship programs. “The typical student probably has no idea that there’s so much money available,” he says. “Too often students and their families have seen student loans as an easy fallback, before they’ve fully explored scholarship and other financial aid possibilities.”

Grants

Grants are a type of financial aid that you typically don’t have to pay back. Federal and state governments offer grants, as do private and nonprofit organizations. Make sure to do ample research to ensure you get your application right, and pay attention to the grant terms. While many grants don’t have to be repaid, some do.

Be careful not to depend fully on grants, though. “Grants might not be available for the length of your degree program,” advises Anna Serio, a staff writer at Finder.com. “Some only cover the first year, while others are only available during the second, third, or fourth year of school. Even if a grant program covers all four years, you might have to reapply every year to be considered.”

Work-Study Jobs

Work-study jobs help you pay your way through school or
cover expenses. Some work-study jobs are paid internships, where you practice
skills and knowledge you’re learning in school or for your future career.
Others might simply be on-campus jobs in dining halls, fitness centers,
tutoring or writing centers, or other areas.

“Work-study
programs are best for students who want to build up their resume,” says Serio. “Work-study
makes it easier to land a job without experience or in a new field if you’re in
graduate school. Sometimes, work-study jobs can turn into a regular part-time
or even full-time position.”

Tax Credits

If you pay qualifying expenses for school, you may be able to claim a certain amount as a tax credit to reduce your tax burden or even get a refund. The American Opportunity Credit, for example, allows up to $2,500 credit per eligible student, while the Lifetime Learning Credit allows qualified individuals to claim up to $2,000 for qualified education expenses per tax year.

State Aid Programs

Almost every state offers grants or other financial aid opportunities for college students. The National Association of Student Financial Aid Administrators provides a detailed list of state financial aid opportunities.

Institutional Assistance

Schools may offer many of their own programs, but they
aren’t always well published. When you’re in the process of considering and
visiting schools, during the application process or even after you’ve been
accepted, make it a point to visit the financial aid office. School financial
aid officers can help ensure you’ve applied for all applicable financial aid.

Employer Education Assistance

If you’re already working, your employ might offer
funding for education. Some employers have programs that cover all or part of
the cost of degree programs if you agree to work for them for a certain amount
of time. Others pay for training seminars, workshops, and one-off classes that
are likely to make you a more valuable employee. Talk to your supervisor or human
resources department to find out if your employer offers such benefits.

Other Programs

Leave no stone unturned when seeking financial aid for
college. Numerous programs exist to help fund education for people in specific
situations.

For example, the Educational and Training Vouchers Program provides assistance to those who are or were in foster care. The National Health Service Corps Loan Repayment Program helps pay for student loans for those who work at Indian Health Services facilities. Be creative! The Tall Clubs International Foundation has a scholarship program for college women who are 5’10” tall and men who are at least 6’2”. Consider what makes you unique and look for scholarship opportunities that may reward you for it.

Tuition-Free Schools

Did you know that there are also some tuition-free schools around the United States? Residents of certain states may qualify for free tuition programs. Be sure to do your research into these schools, as you would with any other. “The programs in the US often require you to work in exchange for your degree,” says Serio. “This can help you develop valuable skills and gives you a leg up entering the job market after you graduate.”

Get the Financial Aid You Need

If you need help paying for schooling, there are plenty of financial aid options available to you. Reach out to your school’s financial aid office for assistance and direction. If you’re interested in learning more about student loan options, you can look through our resource center for more information.

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529 Plans: A Complete Guide to Funding Future Education

Do you have kids? Are there children in your life? Were you once a child? If you plan on helping pay for a child’s future education, then you’ll benefit from this complete guide to 529 plans. We’ll cover every detail of 529 plans, from the what/when/why basics to the more complex tax implications and investing ideas.

This article was 100% inspired by my Patrons. Between Jack, Nathan, Remi, other kiddos in my life (and a few buns in the oven), there are a lot of young Best Interest readers out there. And one day, they’ll probably have some education expenses. That’s why their parents asked me to write about 529 plans this week.

What is a 529 Plan?

The 529 college savings plan is a tax-advantaged investment account meant specifically for education expenses. As of the passage of the Tax Cuts and Jobs Act (in 2017), 529 plans can be used for college costs, K-12 public school costs, or private and/or religious school tuition. If you will ever need to pay for your children’s education, then 529 plans are for you.

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529 plans are named in a similar fashion as the famous 401(k). That is, the name comes from the specific U.S. tax code where the plan was written into law. It’s in Section 529 of Internal Revenue Code 26. Wow—that’s boring!

But it turns out that 529 plans are strange amalgam of federal rules and state rules. Let’s start breaking that down.

Tax Advantages

Taxes are important! 529 college savings plans provide tax advantages in a manner similar to Roth accounts (i.e. different than traditional 401(k) accounts). In a 529 plan, you pay all your normal taxes today. Your contributions to the 529 plan, therefore, are made with after-tax dollars.

Any investment you make within your 529 plan is then allowed to grow tax-free. Future withdrawals—used for qualified education expenses—are also tax-free. Pay now, save later.

But wait! Those are just the federal income tax benefits. Many individual states offer state tax benefits to people participating in 529 plans. As of this writing, 34 states and Washington D.C. offer these benefits. Of the 16 states not participating, nine of those don’t have any state income tax. The seven remaining states—California, Delaware, Hawaii, Kentucky, Maine, New Jersey, and North Carolina—all have state income taxes, yet do not offer income tax benefits to their 529 plan participants. Boo!

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This makes 529 plans an oddity. There’s a Federal-level tax advantage that applies to everyone. And then there might be a state-level tax advantage depending on which state you use to setup your plan.

Two Types of 529 Plans

The most common 529 plan is the college savings program. The less common 529 is the prepaid tuition program.

The savings program can be thought of as a parallel to common retirement investing accounts. A person can put money into their 529 plan today. They can invest that money in a few different ways (details further in the article). At a later date, they can then use the full value of their account at any eligible institution—in state or out of state. The value of their 529 plan will be dependent on their investing choices and how those investments perform.

The prepaid program is a little different. This plan is only offered by certain states (currently only 10 are accepting new applicants) and even by some individual colleges/universities. The prepaid program permits citizens to buy tuition credits at today’s tuition rates. Those credits can then be used in the future at in-state universities. However, using these credits outside of the state they were bought in can result in not getting full value.

You don’t choose investments in the prepaid program. You just buy credit’s today that can be redeemed in the future.

The savings program is universal, flexible, and grows based on your investments.

The prepaid program is not offered everywhere, works best at in-state universities, and grows based on how quickly tuition is changing (i.e. the difference between today’s tuition rate and the future tuition rate when you use the credit.)

Example: a prepaid credit would have cost ~$13,000 for one year of tuition in 2000. That credit would have been worth ~$24,000 of value if used in 2018. (Source)

What are “Qualified Education Expenses?”

You can only spend your 529 plan dollars on “qualified education expenses.” Turns out, just about anything associated with education costs can be paid for using 529 plan funds. Qualified education expenses include:

  • Tuition
  • Fees
  • Books
  • Supplies
  • Room and board (as long as the beneficiary attends school at least half-time). Off-campus housing is even covered, as long as it’s less than on-campus housing.

Student loans and student loan interest were added to this list in 2019, but there’s a lifetime limit of $10,000 per person.

How Do You “Invest” Your 529 Plan Funds?

529 savings plans do more than save. Their real power is as a college investment plan. So, how can you “invest” this tax-advantaged money?

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There’s a two-part answer to how your 529 plan funds are invested. The first part is that only savings plans can be invested, not prepaid plans. The second part is that it depends on what state you’re in.

For example, let’s look at my state: New York. It offers both age-based options and individual portfolios.

The age-based option places your 529 plan on one of three tracks: aggressive, moderate, or conservative. As your child ages, the portfolio will automatically re-balance based on the track you’ve chosen.

The aggressive option will hold more stocks for longer into your child’s life—higher risk, higher rewards. The conservative option will skew towards bonds and short-term reserves. In all cases, the goal is to provide some level of growth in early years, and some level of stability in later years.

The individual portfolios are similar to the age-based option, but do not automatically re-balance. There are aggressive and conservative and middle-ground choices. Thankfully, you can move funds from one portfolio to another up to twice per year. This allowed rebalancing is how you can achieve the correct risk posture.

Advantages & Disadvantages of Using a 529 Plan

The advantages of using the 529 as a college investing plan are clear. First, there’s the tax-advantaged nature of it, likely saving you tens of thousands of dollars. Another benefit is the aforementioned ease of investing using a low-maintenance, age-based investing accounts. Most states offer them.

Other advantages include the high maximum contribution limit (ranging by state, from a low of $235K to a high of $529K), the reasonable financial aid treatment, and, of course, the flexibility.

If your child doesn’t end up using their 529 plan, you can transfer it to another relative. If you don’t like your state’s 529 offering, you can open an account in a different state. You can even use your 529 plan to pay for primary education at a private school or a religious school.

But the 529 plan isn’t perfect. There are disadvantages too.

For example, the prepaid 529 plan involves a considerable up-front cost—in the realm of $100,000 over four years. That’s a lot of money. Also, your proactive saving today ends up affecting your child’s financial aid package in the future. It feels a bit like a punishment for being responsible. That ain’t right!

Of course, a 529 plan is not a normal investing account. If you don’t use the money for educational purposes, you will face a penalty. And if you want to hand-pick your 529 investments? Well, you can’t do that. Similar to many 401(k) programs, your state’s 529 program probably only offers a few different fund choices.

529 Plan FAQ

Here are some of the most common questions about 529 education savings plans. And I even provide answers!

How do I open a 529 plan?

Virtually all states now have online portals that allow you to open 529 plans from the comfort of your home. A few online forms and email messages is all it takes.

Can I contribute to someone else’s 529?

You sure can! If you have a niece or nephew or grandchild or simply a friend, you can make a third-party contribution to their 529 plan. You don’t have to be their parent, their relative, or the person who opened the account.

Investing in someone else’s knowledge is a terrific gift.

Does a 529 plan affect financial aid?

Short answer: yes, but it’s better than how many other assets affect financial aid.

Longer answer: yes, having a 529 plan will likely reduce the amount of financial aid a student receives. The first $10,000 in a 529 plan is not part of the Expected Family Contribution (EFC) equation. It’s not “counted against you.” After that $10,000, remaining 529 plan funds are counted in the EFC equation, but cap at 5.46% of the parental assets (many other assets are capped higher, e.g. at 20%).

Similarly, 529 plan distributions are not included in the “base year income” calculations in the FAFSA application. This is another benefit in terms of financial aid.

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Finally, 529 plan funds owned by non-parents (e.g. grandparents) are not part of the FAFSA EFC equation. This is great! The downside occurs when the non-parent actually withdraws the funds on behalf of the student. At that time, 50% of those funds count as “student income,” thus lowering the student’s eligibility for aid.

Are there contribution limits?

Kinda sorta. It’s a little complicated.

There is no official annual contribution limit into a 529 plan. But, you should know that 529 contributions are considered “completed gifts” in federal tax law, and that those gifts are capped at $15,000 per year in 2020 and 2021.

After $15,000 of contributions in one year, the remainder must be reported to the IRS against the taxpayer’s (not the student’s) lifetime estate and gift tax exemption.

Additionally, each state has the option of limiting the total 529 plan balances for a particular beneficiary. My state (NY) caps this limit at $520,000. That’s easily high enough to pay for 4 years of college at current prices.

Another state-based limit involves how much income tax savings a contributor can claim per year. In New York, for example, only the first $5,000 (or $10,000 if a married couple) are eligible for income tax savings.

Can I use my state’s 529 plan in another state? Do I need to create 529 plans in multiple states?

Yes, you can use your state’s 529 plan in another state. And mostly likely no, you do not need to create 529 plans in multiple states.

First, I recommend scrolling up to the savings program vs. prepaid program description. Savings programs are universal and transferrable. My 529 savings plan could pay for tuition in any other state, and even some other countries.

But prepaid tuition accounts typically have limitations in how they transfer. Prepaid accounts typically apply in full to in-state, state-sponsored schools. They might not apply in full to out-of-state and/or private schools.

What if my kid is Lebron James and doesn’t go to college? Can I get my money back?

It’s a great question. And the answer is yes, there are multiple ways to recoup your money if the beneficiary doesn’t end up using it for education savings.

First, you can avoid all penalties by changing the beneficiary of the funds. You can switch to another qualifying family member. Instead of paying for Lebron’s college, you can switch those funds to his siblings, to a future grandchild, or even to yourself (if you wanted to go back to school).

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What if you just want you money back? The contributions that you initially made come back to you tax-free and penalty-free. After all, you already paid taxes on those. Any earnings you’ve made on those contributions are subject to normal income tax, and then a 10% federal penalty tax.

The 10% penalty is waived in certain situations, such as the beneficiary receiving a tax-free scholarship or attending a U.S. military academy.

And remember those state income tax breaks we discussed earlier? Those tax breaks might get recaptured (oh no!) if you end up taking non-qualified distributions from your 529 plan.

Long story short: try to the keep the funds in a 529 plan, especially is someone in your family might benefit from them someday. Otherwise, you’ll pay some taxes and penalties.

Graduation

It’s time to don my robe and give a speech. Keep on learning, you readers, for:

An investment in knowledge pays the best interest

-Ben Franklin

Oh snap! Yes, that is how the blog got its name. Giving others the gift of education is a wonderful thing, and 529 plans are one way the U.S. government allows you to do so.

If you enjoyed this article and want to read more, I’d suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This article—just like every other—is supported by readers like you.

Source: bestinterest.blog