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How to prepare for the return of student loan payments

For the last year and a half, most student loan borrowers have been off the hook from making payments, but in the New Year that is set to change.

The postponement of student loan payments is set to end Jan. 31, 2022, and now is the time to start preparing for this transition if you haven’t been making payments.

Don’t fret—there are plenty of options for repaying your loans in a way that will fit your current budget, and we’ll guide you through those right here.

First things first, you’ll need to assess what your budget is and how much money you can afford to comfortably put toward your student loans each month. Has your income increased or decreased in the last year? Are you struggling to catch up from being out of work during the pandemic? These are all things to consider.

Next, contact your student loan provider(s) to find out how much your payments are scheduled to be in January. If the amount is more than you are able to pay, you don’t need to panic. Most student loan providers are more than willing to work with you to come up with a repayment plan.

The best option for easing your payments is to apply for an Income-Driven Repayment Plan (IDR). This option takes your income and family size into account and sets your monthly payments at a rate that fits your discretionary spending for 12 months. You can reapply each year, and there is no cap on how many times your loan can qualify for an IDR.

In some cases, you can qualify for a loan forbearance, which will pause your payments all together for a year. This is not an ideal option because interest continues to build during this period and is added on at the end of your loan.

Neither of these, or any other repayment options, have a negative impact on your credit, as long as you make payments on time.

Also remember, any payment plan you set up can be changed without penalty. If your income or life situations change, communication with your student loan provider is key.

For more information on repayment options or to apply for an IDR, visit studentaid.gov.

Tips for Holiday Shopping on a Budget

For many winter holidays may be the “most wonderful time of the year,” but that doesn’t mean they don’t bring their share of stress. Among those list of stressors can be shopping for gifts, especially if your budget is already tight! 

Don’t worry, we’ve compiled a list of tips to help make holiday shopping easier on your bank account this season. 

1. Make a budget

Before you begin any shopping, it’s important to make a budget. Your budget should include how much income you are expecting to make, and all of your important expenses. Make sure all of your bills and other regular priorities are covered first. While it may be tempting, don’t shop for gifts you can’t afford by going into debt. 

 2.  Plan your gifts to fit that budget

Once you know how much money you have to spend on gifts, it’s time to start planning. It’s important to prioritize who you plan to shop for and what you want to get. Also keep in mind that if your budget is tight, you can keep it simple. Save your spending for your closest family or friends. If you have a big family, maybe pitch the idea of secret Santa so you all only have to buy for one person. And don’t feel pressured to spend for every holiday party. 

3.  Shop early for deals

The earlier you start shopping, the easier it will be to shop for a deal. You will not feel rushed by the pressure of last minute to spend more than you budget, and you can have time to hunt for a bargain. Depending on what you are looking for, you may be able to find used items on Facebook Marketplace, eBay,  Craigslist, or thrift stores. You also can check different bargain stores like Target, Walmart, Big Lots, and TJ Maxx, just to name a few. The more time you have, the more you’ll be able to compare prices and make sure you get the most bang for your buck. 

4. Shop alone 

While it’s fun to shop with friends, it can also lead to more careless spending, especially if they aren’t as budget conscious as you. Friends even with the best of intentions may make suggestions like “Oh this would really look good on you!” and before you know it you are buying yourself things you don’t need. 

5. Pay in cash 

If you bring cash to a story you’ll be less likely to overspend. This can be a really effective tool to keep you accountable to that budget you made. 

6. DIY gifts 

You don’t have to be super crafty to make a few gifts yourself. This can be a great option, especially for people you really want to give a gift to but don’t have a big budget, like teachers, coworkers, and other important people in your circles. 

How to make the most of your Child Tax Credit Payments

If you are the parent of a child under 18, there is a good chance you have received two advanced payments of your Child Tax Credit.

For 2021, all taxpayers who meet the income requirements are eligible to receive half of their annual Child Tax Credit in the form of monthly payments ($250 per child ages 6-17; $300 per child under 6). The remaining half will be claimed on your taxes in 2022. If you have questions about your eligibility or haven’t received your payments, you can troubleshoot here.

For many parents, these payments can be a great resource to help meet some basic needs, especially if you are unemployed or have had some economic setbacks during the pandemic.

If you fall into this category, check out this post that may help you prioritize your basic spending needs.

But for those still employed and able to pay your monthly bills, this child tax credit payment can be a great source of extra income, and we want to help you make the most of it!

 

Here are 4 ways you can make the most of this extra income:

1. Establish an emergency fund.

Financial experts recommend everyone should have at least $1,000 saved up in a rainy day fund. Having this basic emergency fund makes things like broken appliances, car troubles, or unexpected medical expenses a lot easier to bear. Additionally, experts further recommend a larger savings that could cover 3-6 months of salary in the event of job loss. This is a big undertaking, so don’t stress if you aren’t able to save quite this much, but every penny you are able to save makes an emergency of any kind much less stressful!

 

2. Pay down debt

Popular financial guru Dave Ramsey is famous for his “snowball method” of paying off debt, and for good reason—it works! In 2016, the Harvard Business Review concluded this to be the most effective method for debt repayment. Here’s how it works:

  1. List all your debts out, smallest to largest.
  2. Pay the minimum payments on all of your debt, regardless of interest.
  3. Put any extra income you have toward the smallest debt you have.
  4. Once that is paid, apply the former minimum payment you made on your smallest debt to the next highest up, plus any additional income on top of that.

Eventually, the idea is that you will be debt free!

 

3. Save for a goal

If there is something you have had trouble saving for, now might be exactly the time to do it! Perhaps you need new piece of furniture, some repairs to your home, or a special getaway with your family. Or might we suggest a down payment for a new home?! To put your child tax credit payments toward a savings goal, we recommend depositing them into a savings account as soon as they hit your bank account if directly deposited, or depositing the check directly to your account if you get a paper check. Whatever you are saving for, this will help ensure the funds don’t accidentally get spent on something else.

 

4. Invest

Investing can be a great way to prepare for the future. There are many options when it comes to investments, and that can easily get overwhelming. To keep it simple, start with what type of investments you want to make. If you are wanting to save for retirement, an IRA is a great way to go. This article can break down some more details on IRA for you.

You also may want to create an investment in your children’s college funds. This is a great breakdown of that option.

Finally, you may be interested in growing your money with the stock market. Here is a beginner guide on that.

Managing money during COVID-19 and ways the federal stimulus may help

These times of global pandemic are truly unprecedented, so it’s only natural if you find your life is quite different than it was just a few weeks ago. You may be laid off from your job; you may be juggling working at home and schooling your children; you may be feeling nervous that you are still working in a setting that feels risky.

Whatever you are going through, we want you to know NeighborWorks Columbus is with you.

Prioritizing Your Spending

We want to help you navigate some of these times, particularly when it comes to managing your finances.

If your income has taken a hit during this crisis, it’s time to prioritize your spending. First, we recommend making a list of all your income and expenses and honestly ask yourself where you can make cuts. Here’s what many experts recommend for spending priorities.

  1. Food
  2. Utilities/Shelter
  3. Insurance
  4. Transportation

Spend in this order to maintain your basic household needs first, and if you have money left over you can work that into your other bills. Don’t forget about your debt payments, but if you see that you will not be able to make minimum payments in full, contact the companies immediately and see if you can work out a deal. You are not the only one in this situation, so there’s a good chance they will work with you.

Breaking Down the Federal Stimulus Package and Ways it Can Help You

By now you probably also have heard that there is a federal stimulus bill to help the country through this time. Not only will most Americans be receiving a check from the IRS, but there are also several components of the bill that may provide some financial relief to you during this time.

Stimulus Payment:

Under the bill, most Americans will receive money in the coming weeks to help ease the financial burden this pandemic has caused many.

Individual taxpayers will receive up to $1,200; married filing jointly will receive up to $2,400 and those with qualifying dependents under 17 will receive $500 per child.

The exceptions? Single taxpayers making $75,000 or above; married couples making $150,000 or above; and heads of household (single taxpayers with dependents) making above $112,500 will not receive these payments.

The money is based on your 2019 or 2018 tax returns if you haven’t filed last year’s taxes, and if you sign up for direct deposit with the IRS you will get a check in your bank account. If you receive paper refund checks, expect it to take longer but will come in the mail.

This check calculator from Forbes will help you calculate how much you will receive.

Unemployment

If you have been laid off from your job due to COVID-19, the good news is there will be a boost in unemployment wages.

In addition to the benefits of the state of Georgia, the federal stimulus will offer an additional $600/week and has been expanded from 26 to 39 weeks. Independent contractors are also eligible to receive these benefits.

In Georgia, all unemployment claims are filed on the Department of Labor website and not in person at this time. Employers are required to file a partial claims benefit on your behalf.

You can find a link to the Georgia Department of Labor site here.

Paid Family Medical Leave

Under the bill, individuals are offered up to 12 weeks of paid family medical leave if unable to work because school or daycares are closed. It covers ⅔ of your typical salary.

Paid Sick Leave for Full and Part Time Employees

Paid sick leave is available if you have Covid-19 or are taking care of someone who does.

Mortgage and Rent Relief

Homeowners can qualify for a 6 month forbearance on their mortgage payments. During that time, interest still accrues, but there are no fees, penalties, or extra interest added to the loans.

Renters, however, only have eviction protection if they live in housing that has a federally backed mortgage.

Do not just stop paying your mortgage or rent. You will need to be in touch with your landlord/mortgage lender to work out this deal ahead of time if your hardship is a result of the COVID-19 pandemic.

Student Loans

There will be no interest or payments due on student loans from April to Sept. 30. Additionally, if you are in a loan rehabilitation program (meaning you defaulted), it is still treated as if you are making the payments during these six months.

There is a lot to unpack in this stimulus package. While there is a statewide shelter in place order, NeighborWorks Columbus will not be open to the public, but our staff is available and just as committed to you. Give us a call, and we’ll guide you through a tough financial season.

 

 

Tips to maximize your tax refund

For many, tax season means a big refund check is right around the corner. While it can be tempting to run out and treat yourself, we have a few tips that can help you make the best of your refund.

  1. Say no to early refunds.

First things first, when it comes to filing your taxes, do not use a tax service that offers you an advanced refund. This type of service will take a huge portion of your refund check. There are several places you can file your taxes for free or very low cost.

Locally, Goodwill offers free tax filing services at several locations. Several online tax filing companies offer no or low cost e-file options that are user friendly and convenient. Don’t let someone else take a chunk of your hard-earned money. In this case, waiting a couple weeks longer for your check literally pays off.

  1. Pay down debt

Using your tax refund to pay on existing debt or collections is a great financial move. Credit card loans have an average 16% interest rate, which can make unpaid debts multiply quickly. If you have other loans, like car payments or student loans, you can use your refund to help reduce your overall debt and the length of time you have to pay loans. Before you make a large sum payment, however, remember to look at the terms of your loan and make sure there is no penalty for early payoffs.

  1. Build an emergency fund

Experts say that ideally, people should have 3-6 months of income saved, but any savings is better than none at all. Financial advisers like Dave Ramsay suggest at least a $1,000 emergency fund to have for accidents or a rainy day.

  1. Save for a down payment on a home

A home is one of the best investments you can make, so if homeownership is one of your goals, start saving for a down payment now. If you qualify for any down payment assistance, you can use the money on any closing costs or repairs or renovations you may need to make. If you’re not sure if you qualify for a home yet, give us a call and we’ll walk with you through the process!

  1. Give your home some TLC

If you already are a homeowner, a tax refund could go a long way in making some home repairs or improvements. Tax money could go a long way toward big repairs or even just little improvements that could enhance your quality of life. Replace a leaky faucet. Update lighting. Service your heat and air conditioning. You get the idea.

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