What Have You Earned? What Have You Kept? Get your Social Security Statement

Posted on July 17, 2018February 8, 2019 by Dawn Kennedy

The federal government stopped mailing annual Social Security statements to everyone back in 2011. They are still available, but you have to use the internet. I don’t mention this earnings statement because I believe the Social Security program is solvent, or have a prediction whether it will be fixed, or even necessarily believe any “projected benefits” will ever be received by the time I am ready to retire. What the statement will tell you is how much you have earned each year, as reported to the Social Security Administration, since you started working and reporting income to the SSA.

We can go back (waaaay back) to 1990 and look at the average net income earned by average Americans over the last 26 years. The SSA reports $20,172.11 in 1990 and $46,640.94 in 2016. Meaning that for average Americans, we take home more than double each year now than we did in 1990. On the bottom of the SSA statement there is a number- your total earnings to date. In other words what you have earned over your working life.

If you worked and earned an average income from 1990-1999 you would have brought home about $209,056.00. From 2000-2009 about $351,192.00. And from 2010-2016 about $304,037.00. So, if we added the average net income earned and taken home by average Americans from 1990-2016, we get a mind blowing $864,289.00. Well over three quarters of a million dollars. And many people earn well above that annual average.

So, what do we KEEP? According to the latest statistics? Not much. Some of us have a 401k with auto withdrawal and a match at work. But, around 20% of those with a 401k have loans against the accounts taken to cover financial emergencies! Savings accounts are in bad shape as well, in 2017 about 57% of Americans have less than $1,000.00 in savings.

Where is it all going? To service debt. At various interest rates, for various reasons. Average Americans are paying their dollars to cars, homes, student loans, credit cards and personal loans. Excluding a mortgage payment, we send creditors a whopping $1181.00 per MONTH or $14,172.00 a year. Many Americans send much more than that to others.

It’s eye-opening, or at least it was for us. Debt is taking our income, payments that we can do other things with. Like save. Or pay cash for cool things. Or support organizations we feel strongly about. If you are ready to take back your income, you can start anytime. Even if you are still paying oodles of interest and have $1.87 in an IRA right now, its never too late to start. Its never too late to grab a hold of your hard-earned income with a plan to take back your earnings from the current situation.

If your income is flying away the moment after payday, it’s time to make it behave. Make a monthly budget and write down where each dollar goes. Give it a job. Be the smart boss over your hard-working money. Your money likes to have a job. “This month you little dollar, yes YOU, will pay the water bill! YAY!”. If you want an easy to use, free online budgeting tool, I recommend Every Dollar. Money stress really begins when you run out of dollars before you run out of jobs for them to do. Run out of jobs and reassign your money where you want it to work!

Know the Enemy: Your Student Loans

Posted on July 10, 2018February 8, 2019 by Dawn Kennedy

Ahhh, student loans. The loans for higher education that about 44 million borrowers owe at an outstanding balance totaling a staggering $1.48 trillion. That is higher than our total US Credit card debt! But national statistics aside, where student loan debt looms over the average family its personal and distressing. The average student loan debt in 2017: $37,172.00! I know, I know, loans have enabled many people to go to school who couldn’t afford it, but nobody foresaw this mess! College costs exceed the cost of inflation! Lots of people don’t finish…

Many students take the loans without really counting the future price of carrying this type of debt. And for those who do not graduate? Well, your loan for the entire semester was disbursed to the school- and you owe it. Student Loan debt is a huge stressor for new college grads, with the monthly payments making it hard to get a car or save for a home .

And there are pretty scary steps that servicers can take when you owe and don’t pay, including garnishing wages and social security checks without a lawsuit. And getting rid of these obligations is not as easy as some others because these loans are typically not dischargeable in an average bankruptcy (for now). Finally, while there are currently NINE different payment plans for federal student loans, some stretch out the terms of the debt for 25-30 years. That is a mortgage!

The only way to get rid of these loans is to have a plan and pay more than the monthly payments. These guys need to be attacked with a vengeance. I mean, who wants to have an education debt for 10-25 years? Or have a high debt to income ratio on their credit report? Yeah, credit reporting includes the total amount of the loans and any balance increases accruing monthly. There are real dangers in these high balances on reports for people who have security clearances or must have a background check for employment. But where to start?

These steps are for federal student loans. For private loans, contact your lender.

First, get your loan balance, monthly payment, status (for each if you have more than one), and type of loan from the National Student Loan Data System (NSLDS). https://www.nsldsfap.ed.gov/nslds_FAP/ Note that there are several types of loans. Federal Family Education Loan (FFEL) and Direct Loans are two common types taken by students, and Parent PLUS loans by parent borrowers. The type of loan is important because not every loan type is available for all payment plans. It’s complicated.

Second, if you have multiple loans over several years, listed as “Loan 1,” Loan 2,” etc. they will be listed by amounts and dates of disbursement. You may benefit from consolidation of the outstanding loans into one or two. Often Unsubsidized and Subsidized are consolidated separately. Subsidized means Congress pays the interest while you are in deferment or forbearance, so they accrue interest differently and have a different character than unsubsidized, where interest accrues immediately upon disbursement. There is a limit to the number of consolidations you can do, and the credit agencies will report it as a “new loan.” This will likely affect your credit score, if you are worried about your FICO.

Third, check out the federal loan “repayment estimator” to look at the payments that may be available. https://studentloans.gov/myDirectLoan/mobile/repayment/repaymentEstimator.action. CAUTION some plans are based on your loan balances, some are based on your current income and go up in payment every few years, and some require entrance into a program that you must requalify for each year or your loan converts to the “10 year standard plan” with the highest monthly payment. Also, for some programs, the interest will automatically “collateralize” or transform into “principal” added to the loan… and interest then grows on the new principal. READ THE FINE PRINT.

Again, the best way to get out of the student loan mess is to get serious about kicking student loan debt out of your life. Payments above and beyond the minimum are going to make a dent faster than just treading water with monthly payments. I firmly believe no one should be in debt for 25 years to earn a college degree. Seriously, read that again. In debt for 25 years to earn a college degree. But before you can start to make plan, you need to know your “enemy.

https://studentloanhero.com/student-loan-debt-statistics/

ii https://www.debt.org/students

iii] https://www.cnbc.com/2017/10/17/student-loans-take-a-mental-toll-on-young-people.html

The information in this blog post (“post”) is provided for general informational purposes only and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from The Law Office of Dawn K. Kennedy or the individual author, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.

The Price of Debt on the American Family

Posted on July 3, 2018February 8, 2019 by Dawn Kennedy

The second definition for “Price” in the Oxford dictionary online is, “an unwelcome experience, event, or action involved as a condition of achieving a desired end,” and the usage example given is, “the price of their success was an entire day spent in discussion.” For many Americans, the price of their credit cards, or driving a car with high payments, or a mortgage payment that is keeping them “house poor” is that unwelcome experience. And a result of that unwelcome experience is debt. And the price of that debt is stress.

Americans are stressed about their financial condition. The price of such worry is costing money in healthcare related to stress, relationship issues related to fights over money, and job productivity decline. A very recent and startling statistic, published by CNBC in March 2018, reveals 30% of Americans are stressed about money, “constantly.” And a whopping 85% reported being stressed “sometimes.” Here is the top reason from the article:

“Why? Well, 66 percent of adults, including 71 percent of millennials, say it’s because they don’t have a three- month emergency fund, and 46 percent say it’s because they don’t have any savings set aside in one to cover an unexpected expense like a job loss or medical problem.”

This is not a new phenomenon that all of the sudden Americans are stressed about money. A 2014 report from the Consumer Financial Protection Bureau found that seven out of ten American workers say financial stress is their most common cause of stress, and almost half (48%) say they find dealing with their financial situation stressful.

Why am quoting stats when you may be visiting this article for ANSWERS because you are up at night unable to sleep due to money worries? Because you need to realize up front that are not alone. CNBC’s report translates to almost 3 out of 10 Americans are stressed constantly, over 8 out of 10 are stressed sometimes. I know, I know, “my situation is different…” and I know that it is! Everyone’s situation is uniquely theirs.

What I am on a mission to change is the shame, guilt, hopelessness and embarrassment people feel when they are deep in money problems. I think that is so important. Debt is hiding in the households of the American family and it is killing the livelihood of many of us. We need to throw open the curtains and look around and understand we are not alone. You CAN take control of your money and regain your peace of mind. You CAN find people to walk with you. You CAN create the plan that is right for you and your unique situation. And you can get back that good night’s sleep.