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Jodi’s Corner: A Decade of Excellence at Powercat Financial

We can’t believe it’s the start of 2020! It’s going to be a perfect year as Valentine’s Day is on Friday, Cinco de Mayo is on Taco Tuesday, 4th of July and Halloween are both on Saturdays, and Christmas will be on Friday! YIPPEE!

We also can’t believe Powercat Financial has been in existence now for 10 years at Kansas State University! We wanted to take this opportunity to thank all of our supporters and students who have contributed to our success. We especially want to thank the over 350 students who have served as peer financial counselors, Student Advisory Board members or Residential Financial Specialists that are passionate about helping fellow K-State students with financial education. They have helped students navigate the complexities of paying for college, balance school and work, understand federal student aid, manage student loan repayment, negotiate job offers,  build good credit habits and more.

When K-State created Powercat Financial in 2009, it was the first peer-to-peer financial education program in the state of Kansas and one of few in the country. Now Powercat Financial is seen as a national leader and more and more colleges and universities are creating financial education centers as this support is seen as a critical mission in higher education. In fact, there is now a national alliance of college financial wellness programs called the Higher Education Financial Wellness Alliance that serves to bringing together post-secondary organizations to inform national conversations that impact the financial wellness field, public policy, and educational support services.

Thank you for being a subscriber to our Powercat Financial blog and joining us in learning more about financial wellness topics. When the peer financial counselors return from break the end of January, we will resume our weekly blog posts of helpful money tips created for students, by students. In the meantime, look through our archived posts for lots of helpful financial information we have shared over the years.

Please let us know if we can be of assistance to any K-State student needing financial guidance in 2020 or beyond!

Students can request a free appointment with one of our peer financial counselors via www.k-state.edu/powercatfinancial.

Jodi Kaus, JD, CTFA – Director

PowercatFinancial

www.ksu.edu/Powercatfinancial

Last Minute Gift Giving: 5 Tips to Stretch Your Dollar

With classes coming to an end and finals quickly approaching purchasing gifts for the holiday season may take a back burner for some of us. Then when the workload slows down the new panic of trying to find the perfect gift for our loved ones will slowly creep up on us. This may also cause some to loosen their hold on their money to get the present in time for celebrations. The following tips will help you snag those gifts while still saving some money.

  1. Redeem Credit Card Rewards
    • This one will only be useful if you already use credit cards. Some cards have the perk of rewards being earned when you purchase items with your card. If you are like me and forget to check how much in rewards you have built up you could have a nice amount that can be cashed out and put towards your gift purchases. The rewards come in all different forms. Some examples include statement credit and gift cards.
  1. Use the Amazon app or the shopping tab in Google
    • The Amazon app can help you not overpay for last minute gifts. You can scan items with the app when you are shopping in stores that have price matching with competitors and if you see a lower price, ask for the low price at customer service where you are shopping. If you are like me and like to do your shopping online. You can always use the Google shopping tab once you have found what you would like to purchase and find the store with the lowest price.
  1. Get stocking stuffers at the Dollar Store
    • This is a great place to get all the smaller items that are needed to fill up a stocking. Just go in and pick out all the toys, stickers, kitchen gadgets or whatever else your family may want all for a dollar a piece!
  1. Take advantage of different stores offers
    • All stores will have different sale opportunities or other offers that make the shopping experience better. Walmart has free in-store pick up on Christmas Eve and will hold items for up to seven days. This can help you out if you have bigger items that need to be purchased that you may not be able to hide in the house and will lower the cost since there is not shipping. Another store to mention is Kohl’s. This option is only for the bravest of us since it involves shopping on Christmas Eve. Although this can be a hectic time to shop, Kohl’s has been offering $10 Kohl’s cash for every $50 spent for a few years now.
  1. Shop online on Free Shipping Day
    • My final tip is to shop on the Free Shipping Day, December 14th. Some retailers who usually participate are Kohl’s, Walmart and Best Buy. This way you do not have to leave the comfort of your own home but will still get a great deal!

Remember you can always make an appointment with Powercat Financial if you have other financial questions. Schedule a free appointment with one of our peer financial counselors at www.k-state.edu/powercatfinancial.

Rebecca Kuderka                                                                                          Graduate Assistant                                                                                      Powercat Financial                                                                                        www.ksu.edu/Powercatfinancial

Sources:

https://thekrazycouponlady.com/tips/money/last-minute-holiday-shopping

https://kalynbrooke.com/your-money/money-saving-tips/christmas-savings-plan-ideas/

The Impact of Interest Rates

What are the true costs of borrowing money? One of the major factors when borrowing money is the interest rate, also known as what the company you are borrowing money from is charging you. The main places college students will experience the impact of interest rates is on student loans and credit cards. Taking caution when making decision regarding these two areas is very important! Decisions we make now can have long-term impacts on our financial situation.

Student Loans

While some students have to borrow large amounts of loans to pay for school and others do not borrow any, the average amount of student loan debt per borrower at Kansas State is $26,216. It is very important to remember, however, that you will not end up only paying the original amount you borrowed in school. The interest rates on your loans will increase the amount you have to pay back over time. Let’s take a look at a few different types of loans and how their interest rates would affect paying back the Kansas State average of $26,216.

Federal Direct Unsubsidized Loan – 2019 Rate: 4.53%

  • If you stay on the Standard repayment plan for these loans, which is consistent payments for 10 years, you would pay a total of $32,604.
  • This is $6,388 in interest over the 10 year life of the loan.

Federal Direct Parent PLUS Loan – 2019 Rate: 7.08%

  • These loans will be registered in your parent’s name. If you stay on the Standard repayment plan for these loans, which is consistent payments for 10 years, you would pay a total of $36,683.
  • This is $10,467 in interest over the 10 year life of the loan

Private Loan – Average Fixed Rate: 9.66%

  • These are loans you could find from a bank, credit union, or private loan servicer. Their interest rates are based on your credit worthiness, while loans from the government are not. If you stay on a 10-year repayment plan for these, you would pay a total of $41,053.
  • This is $14,837 in interest over the 10 year life of the loan.

As you can see, interest rates can make a huge difference when you have to pay back your loans! Before accepting financial aid next semester or next year, be sure to check the interest rate first.

Credit cards

If you think interest rates on student loans are high, you’ll be surprised to hear that credit card interest rates, known as the Annual Percentage Rate, can be more than double what student loan interest rates are. It is not uncommon for college students to have APR of 20-25%. Being conscious of your credit card interest rate is important for two main reasons.

  1. If you pay your balance off in full each month, the interest rate will never affect you. The interest rate is how the credit card companies make money and it will only apply if you still owe money at the end of each month. They give you the option to make a minimum payment, but you should pay off the full balance if you are able to.
  2. If you only make minimum payments, the amount you owe will continue growing at a very quick pace. For example, if you owed $5,000 with a 14% APR on your credit card and only made minimum payments, which were 2% of the balance, it would take you 22 years to pay off that amount. Credit card companies are required to tell you how long it would take to pay off your balance on each statement if you made minimum payments. You can find this on your monthly statement!

With this knowledge, I want to encourage all of you to think cautiously when making decisions about your student loans and credit cards. Interest rates do have a major impact!

Sources: https://www.thebalance.com/how-long-to-pay-off-balance-with-minimum-payments-961120, https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007

Thomas Meek
Peer Counselor II
Powercat Financial
www.k-state.edu/powercatfinancial
powercatfinancial@k-state.edu

Tips and Tricks for Holiday Travel

Its officially that time of the year again, it’s holiday season! Soon enough we’ll be enjoying turkey and giving thanks, followed closely by gift giving and Christmas carols. Your holiday plans may include fun activities, but there are also a lot of not quite so fun parts of traveling during this busy season. Whether you are flying home, road tripping to a Friendsgiving, or perhaps going on a vacation, having the right travel tips and tricks could reduce stress and help you save on expenses. Here are six things to consider before making your holiday travel plans so that you can enjoy a little peace of mind this holiday season.

  • Create a Budget

The first step in determining how much you can afford this holiday season is planning for it and determining the expenses that will occur. Before you start dipping into your emergency savings, figure out how you will get there and how much that will cost, where you will stay, and what you want to do while you’re there. Can you afford that flight, or would it be cheaper to drive? Do your research and shop around. In addition, don’t forget the little things. While airfare, gas, hotel, rental car, and/or food should all be at the top of your budget, don’t forget things such as ATM fees, tolls, coffee/snacks, etc.

  • Travel During the Week

If you are able to adjust your plans, it can often times be cheaper to fly during the week. And if you’re road-tripping, then you’ll face less traffic on the road creating less stress. The date you actually travel could potentially save you money.

  • Travel Light

Instead of spending a large amount of your budget on checked luggage, choose to travel light with just a carry-on or one checked bag, if you must. If this isn’t possible for you, consider shipping your gifts or excess luggage. This can potentially be significantly cheaper and help you save on expenses.

  • Skip Airport Parking

Airport parking can add up quickly if you’re planning to take to the skies this holiday season. Consider saving money by utilizing carpool or rideshare services like Uber or Lyft and skip the airport parking altogether.

  • Consider Travel Insurance

While this might not be at the top of your list, travel insurance can cover things such as trip cancellation, medical treatment, lost luggage or a missed connection. Since this is one of the busiest times of the year for travel, delays and overbooks can be expected as well as winter weather for this time of the year. The extra money you pay for this could potentially save you hundreds in a worst-case scenario. In addition, don’t forget to add this to your budget!

  • Utilizing Credit Card Benefits

If you’re an avid traveler, maybe you have points built up with a certain airline or with your credit card. Accruing points to put toward your holiday trip can help you to save hundreds of dollars. Or perhaps you have great cash back rewards that will you earn you some money on your expenses over your trip. Don’t forget that its important you are using you travel credit cards or any credit cards in the right way. Paying your card off on time and in full is very important to keep you out of holiday debt and not worry about interest payments.

If you need additional help with creating a holiday budget or have further questions, then Powercat Financial is here to help! The peer counselors are available to assist you with any of your financial concerns. Schedule an appointment with us today at www.k-state.edu/powercatfinancial/! We look forward to meeting with you.

Emma Drees

Peer Counselor II

Powercat Financial

www.k-state.edu/powercatfinancial

Retirement Accounts Are Not Investable Securities

Retirement Accounts:

A common misconception I see when interacting with fellow students revolves around retirement accounts. I understand the confusion because, even after majoring in Personal Financial Planning for a year, retirement accounts were still confusing. The hope of this article is to clear up a couple misconceptions and explain the differences between traditional IRAs and Roth IRAs.

The Misconception:

Retirement accounts, like Roth IRAs and Traditional IRAs, are not savings accounts with consistent rates of return. Often, when financial planners discuss these accounts and a client’s potential returns, they state the return as a level percentage. For example, during a presentation, the presenter may say the account has an estimated 8% return. This is the assumed average return over the life of the account. The actual daily account balance and percent return will fluctuate depending upon the investments held within the account. This brings me to my second point, IRAs are investment accounts. They hold investments. You do not simply purchase 1,000 shares of a Roth IRA. Let me provide a simplified look at the mechanics of opening and funding one of these accounts. To begin, you open an account with either an in-person financial advisor or online. There are hundreds of different places where you can open an IRA. Second, you would place funds, most likely cash, within the account. Finally, if you should so choose, you can buy different investment securities within the retirement account. The reason I write concerning these issues is my own past confusion. These are accounts are “buckets” that hold the investments.

What’s the Difference?

The investments inside of each account receive different tax treatment because they are sheltered within the account. When you place money inside of a Roth IRA, you are contributing on an after-tax basis, meaning you already paid taxes on the cash going into the account. The benefit comes when you withdraw money from this account. When you make a qualifying distribution from the account, you do not need to pay taxes on the money you originally put in or on the gain made by your investments. Look at this way, if you buy $1,000 worth of stock and it grows to $1,500, when you sell the stock you would ordinarily be required to pay taxes on the $500 in gain. If this stock were sheltered in a Roth account, you would not have to pay any taxes on the gain so long as you made qualifying distributions from the account. You just generated tax free money!

If you place money into a Traditional IRA, you usually are putting in pre-tax money. Money that goes in pre-tax avoids federal income tax until you withdraw the funds. Assume you placed $5,000 of tax-deferred money into a Traditional IRA and it grew to $7,500. When you make a qualifying distribution, you will pay ordinary income tax rates on the whole $7,500. Outside of this tax-deferred account, you would normally have bought stock with after-tax money and, when sold, paid capital gains taxes on any gain made with your investment. Traditional IRAs provide the benefit of helping lower your taxable income today. The other hope is that your income will be lower in retirement, so you pay less taxes on said income.

Are you concerned about your financial future? Consider coming into Powercat Financial where we provide free and confidential advice to all K-State students. If you are ready to more efficiently use your money, schedule an appointment at https://www.k-state.edu/powercatfinancial/. We would love to help you develop healthy financial habits!

Philip Wegman

Peer Counselor II

Powercat Financial

www.k-state.edu/powercatfinancial

 

Healthy, Wealthy, and Wise

Cold and flu season is upon us. It won’t be long and everyone will be missing class or work because they are feeling under the weather. Although catching a cold or getting the flu is an awful experience, you likely won’t suffer financially to get better. Sometimes you can get by without visiting a doctor; all it takes is rest, over-the-counter medicine, and plenty of fluids and in a few days you start feeling better. Other times, you may find yourself in a doctor’s office if you have trouble getting rid of it. Even so, your expenses likely won’t be drastic.

But what happens if you end up in a hospital for a more serious reason? What if you are diagnosed with an illness that requires serious treatment? What if you get in an accident and are hospitalized or are faced with expensive surgical costs? The average one night stay at a hospital can cost you $3,949 according to Debt.org. If your visit to the hospital requires surgery, your costs can set you back tens of thousands of dollars. No wonder 60% of all bankruptcies result from medical expenses! For more information on medical care costs, visit https://www.debt.org/medical/hospital-surgery-costs/

Because of these reasons, obtaining a good health insurance policy can be one of the most financially sound decisions you can make. It’s similar to having a 3-6 month emergency savings account; it acts as a cushion in case something bad happens in life. Choosing the right coverage can be hard if you don’t understand the terminology behind it.

A premium is a payment you make to keep the insurance policy in force. It is usually monthly payments for health insurance. A deductible is an amount you have to pay out of pocket before the insurance coverage kicks in. After you hit your deductible, you may have to pay what’s called coinsurance. If you have to pay coinsurance, you pay a certain percentage of health expenses. For instance, you may pay 20% of all costs after your deductible and the health insurer will pay 80%. You are required to pay this percentage until your out-of-pocket max. At this point, the insurance pays for all covered health expenses. Copays are a flat fee that you pay out of pocket for certain services like a visit to the doctor’s office or a prescription.

Private health insurance plans are expensive. The average monthly premium in 2018 for an individual that is 18-24 years was $257 according to ehealthinsurance.com. The average family plan was $1,168/month.

There are ways to save on health insurance, but you need to evaluate your risks before cutting corners on health plans. First, if your parents have a family health plan, you are covered under that plan until your 26th birthday. Increasing your deductible and the amount of coinsurance you pay can reduce your premiums but will also increase how much you will pay out of pocket for expenses. You can also save by choosing a plan that isn’t as flexible. This type of plan requires you to choose a single physician that you will go to every time you need care.

Many employers offer health insurance plans as part of your compensation. With most of these plans, you can get pretty good coverage for little cost. If your employer does not offer a plan, you may qualify for a subsidy from the government known as a premium tax credit. It’s meant for those who may not be able to afford health insurance. There are certain rules for this subsidy, so make sure you understand each.

It is important to never risk more than you can afford to lose. A lot of people look at the costs associated with owning health insurance and choose to go without. In reality, the cost of NOT having health insurance could be 10 or even 20 times more than your premiums if you were to get sick or injured. If you’re worried about how to fit health insurance premiums into your budget, or curious about how you can be better prepared for emergencies, visit a Peer Counselor at Powercat Financial! You can schedule an appointment at https://www.k-state.edu/powercatfinancial/

Morgan Flax

Peer Counselor II

Powercat Financial

www.k-state.edu/powercatfinancial

References:

https://www.ehealthinsurance.com/resources/affordable-care-act/much-health-insurance-cost-without-subsidy

https://www.healthcare.gov/

https://www.debt.org/medical/hospital-surgery-costs/.

https://www.hhs.gov/healthcare/about-the-aca/young-adult-coverage/index.html 

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