The first thought that crosses everybody's mind the moment they throw that cap into the early Summer air is: Loans. Gotta pay them off, gotta pay them off!
Or do you?
Student loans are very often associated with anxiety and stress. A study published last year in Social Science & Medicine, was the first to report on the direct link between mental health and student loans. In part, the study concluded that "Student loans were associated with poorer psychological functioning" and that "this association varied by level of parental wealth [...] only, and did not vary by college enrollment history or educational attainment." Ouch.
How deep in debt was the average student they studied? $23,300.
But according to Shannon McLay, of Next-Gen Financial, a financial consulting firm that focuses on working with millennials, all that anxiety could entirely be misguided. Simply making minimum payments on your student loans instead of rushing to pay it off as soon as you can is often a much healthier financial decision, McLay says. "Thousand-dollar events happen all the time," McLay warns, referring to emergencies or other surprise expenses that almost all financial advisors recommend keeping a well-funded savings account for. Paying too much of your student loan can result in not having the money there when it is needed most.
Even Bobby Hoyt, who founded the popular finance blog Millennial Money Man, a website premised on its founder's ability to pay off his $40,000 student loan on a teacher's salary in a year and a half, admits he might have made some mistakes. "I could have really, really screwed myself over," he admitted to Money Watch, "I could have put myself in a bad position if, say, I had gotten hurt."
A great resource to see what your options are is Credible, a website that allows graduated students to compare competing rates to repay or refinance their student loans. It's especially useful if you have higher-interest private college loans, as opposed to ones that are government-subsidized, as it might make sense to refinance them based on what kind of career path you plan on taking.
Despite the amount of stress that college loans cause simply by hanging over you, the interest rates you pay is often actually considerably lower than almost any other loan or financial transaction. Making that credit card payment is definitely a bigger priority, says McLay. In fact, in some cases, the interest rate might be so low that it is could be entirely mitigated by inflation: you could actually be losing money by trying to pay off your college loan!
Per Market Watch, if you invested the percentage of your paycheck that many college grads dedicate to paying off as much of their loans as possible into, say, blue chip stocks, you could be exponentially turning that money into investments that rise in value with the marketplace. Whereas, when you finish paying your college loan, "Your cash is gone," says McLay.
When thinking about that college loan, it might pay to relax a little.
It might pay even more to invest a little.
Whether you are looking for a new job or trying to grow in your current one, getting a certification can be a great way to improve your skills.
Anyone can put that they are proficient in a computer program on their resume but having a certificate can help you stand out amongst the competition and give credence to the strength of your skills.
But what's the best way to invest in yourself without breaking the bank? Some certification programs can cost hundreds if not thousands of dollars. We are going to walk through six of the best certifications you can get for $100 or less.
Who is it best for: Those who work with analyzing and presenting data.
Cost: $100 for Tableau Desktop Specialist; additional certifications are available for a larger fee.
More companies than ever see themselves as data companies. Being able to understand data and use it to guide decisions at your company is often critical to taking on a leadership role. Not to mention, being able to present the data in a clean, attractive, and compelling way can help get buy-in from others in your organization or clients. That's why Tableau is a great tool to have in your toolbox.
Tableau allows you to create interactive visual analytics dashboards. In layman's terms, you can take data; create graphs, maps, or charts; and then allow end-users to interact with these graphics to better understand the information. It's a fantastic tool allowing non-technical users to gain insights for data-driven decision-making.
Tableau Desktop Specialist certification starts at $100 and has no expiration date. There are many videos on Tableau's site to prepare for your exam as well as Tableau Starter Kits allowing you to play around and learn the different capabilities of the program. Tableau offers a 14-day free trial as well as free license for one year for students.
Additional certifications after Desktop Specialist are Desktop Associate and Desktop Professional. Those working with a Tableau server may also be interested in a separate certification as a Server Associate or Server Professional.
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When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.