Save while Living in Luxury: This Couple Pays just $600 for a 6,000 sq ft Mansion

Do you want to live life king size? Do you wish to stay in a luxurious and sprawling mansion at complete peace of mind?

Perhaps you would if you could get to rent a palatial home at pennies. Professional vacant home caretaker Robert Krier, a 65-year-old semi-retired music teacher, lives in a 6,000 sq ft stone house in downtown Denver just for $600 a month.

Sounds weird, right? Here is how to save thousands in rent by living as a vacant home caretaker.


Who hire vacant home caretakers?

Vacant properties are difficult listings for homeowners, realtors, and real estate agents. Real estate professionals agree that an occupied home sell as much as 30% faster than those left vacant. While many homeowners hire guardians for their vacant home themselves, there are many professional vacant home caretaker businesses across the country who hire vacant home caretakers.

The Kriers, who got in the game seven years ago at the height of the housing market, are clients of Denver-based Caretakers of America, or COA. During the years, they have already helped sell 10 homes and now on their 11th property.


What does a professional caretaker need to do?

Well, it’s not exactly cosy. You must keep the home staged for showings seven days a week for about 10 hours starting around 9 a.m. You should be committed to caring and maintaining the home, always. You can plan otherwise while in your own home, but here you have to have the place straightened up before you leave for work, the dishes done, the bathrooms neat.

Being a professional vacant home caretaker, you put all the utilities in your name, maintain the lawn and gardens, and remain committed to stage the home before potential buyers without notice.

In fact, you have to take care of the property like a newborn and much more than your own home.


What qualities do homeowners look for in caretakers?

"We find credible, well-vetted tenants," says Tom Schmidt, who started Homes In Transition, or HIT, in Albuquerque, N.M. The screening process includes a background check that covers immigration status, criminal history and credit standing.

You have to be reliable, responsible and flexible, and at the same time a great neighbor to those living around. Apart from these, the furniture and other furnishings you own are also checked to see if they match with the property. Sometimes, you can be denied just because you smoke or own a pet.

As a vacant home caretaker, you should be able to understand the concerns of the owner or realtor and share the vision of transforming the vacant property into a beautifully staged home that will sell fast.

Once sold, you should be flexible enough to vacate the property within short notice.


How much you can save?

A three bedroom, 1200 sq ft home in downtown Denver would cost you somewhere around $2,000 a month. However, the Krier couple is boastful of their four bedrooms, five fireplaces, and a wraparound wooden porch that they enjoy just by paying ⅛ of what they would have to actually pay for a standard rental.


Would you consider becoming a professional vacant home caretaker?

If you don’t mind changing your house every 90 days, this could be an attractive way to save money on home rentals. If you have just moved into the town and looking to get a feel of the market before buying a home, living as a caretaker could be an option. This could also be a good option for people with financial difficulties, who are looking to get back on their feet, and for those who just want a good place to stay for a short tenure and don’t have the money for a regular rental.

Caretakers of America keeps on enrolling caretakers for their vacant homes. If you are willing to get hired as a caretaker, click here:

Author Bio: Andy is an editor with Oak View Law Group and contributes specifically on personal finance topics. You can also find him fielding queries based on money management topics at various online communities and social media platforms.You may find his writing here Comparecards,Realmoneyanswers, Familyshare.


Financial Tips for New Military Members: Part 2

You’ve read Part 1!  Here’s part 2!

TIP:  “Don't rack up the debt. I've seen many airmen do that because suddenly they can get credit cards and such, now that they're in the military and have a stable income.”  -TSgt Kaleta, Angela

“I would suggest avoid using credit cards unless it's an emergency. Too many young Marines get wrapped up in them and before they know it, are way over their head in debt.”  –SSgt O’Connor, Thomas

Just because you CAN get a credit card doesn’t mean you should.  Every financial expert can make an argument that you need a credit card to build your credit.  If, and only IF, you’re mature enough to know that you can control your spending, should you have a credit card to build your credit.  If you know you will tend to swipe the card, then steer clear of using plastic to pay for anything.  Understanding how to use a credit card properly can build great credit, using plastic irresponsibly may lead to owing more than you want to pay.  

TIP:  “TSP, CD's, and a savings account that never gets touched. Learn about the stock market and invest small amounts” –SSgt Debose, Ana

I touched on TSP in ‘Part 1’. This tip encompasses savings in general.  Some people have a true savings account.  Some have a ‘save a little money, take a little bit out’ account.  There’s a BIG difference.   To use a savings account correctly, you don’t touch your savings.   If you properly save, and you don’t spend those savings early in your life, then your 30/40-year-old self will praise your saving habits.  Why? Because saving without spending for that length of time will allow you to have a ridiculous amount of money to retire on.  Think about it.  You’re 18-20 years old now.  In 10-20 years you’ll be 40-ish years old, you can say “I have $150k - $250k - $500k I’m going retire with.”  Consider the typical 40-ish year old person.  It’s likely they’re working hard and yet, not retiring anytime soon.  You can have that large amount you saved in TSP and get another job after the military… retire after 15 years (you’ll be 55 years old), and have two retirement incomes! Smart retired veterans do it all the time. Why not start saving early so that can be you?

TIP:  “Read The Total Money Makeover by Dave Ramsey and do what it says. – Sgt Reid, Tyler

Successful people are willing to do what other people are not willing to do.  If you’re serious about retiring early and managing your finances better than your peers, then you should be reading about money.  Reading books about being savvy with money is essential to your success.  These types of books provide you with hard learned tips from people that have been successful at the game that we play with money everyday.   


Financial Tips for New Military Members: Part 1

So you’ve just graduated from boot camp.  You’ve now earned the right to be called an Airmen, Coast Guardsman, Marine, Sailor or Soldier.  Whether you’re in your MOS school, in combat training, or you’re on your way to your first unit… you have financial choices to make that will either give you freedom or take that freedom away 5 to 10, or even 20 years from now.

For most of you, this is your first real job.  If you’re 18-19 yrs old, then you’ve never had income beyond that part-time gig after school.  And don't worry, every service member goes through this phase, and honestly… very few of us ever make financially sound decisions because this is NEW.   

I’ve had the pleasure of serving with many servicemen & women over my 7 years on active duty.  Before writing this post, I reached out to them to ask what advice they would give if they could go back in time and speak to themselves right after they graduated bootcamp (some did 3 years and got out while some did 20 years and retired).  Not ONE of them said, “You know what Chris? I wouldn’t change anything about my financial choices when I first joined the military.  I knew everything I needed to know.”  That’s because nobody talks to the new troops about the common financial pitfalls young service members face (and lets be honest… sometimes the LAST thing a 18-19 year old service member wants to do is listen to a salty old E-7 say that phrase “…back in my day…").

Lucky for you, I have some short & fast tips that don’t include any “When I was your age…” comments!

TIP: “Plan your wants and needs.  Better balance of spending.”  -Sgt Sirls, Will

This is actually sound advice whether you’re in the military or not.  In your first few years in the service (unless you have children) you don’t NEED a new car, a new speaker system, the latest smartphone, or a brand new wardrobe.  Those are all WANTS.  Also, make it a habit of leaving your credit/debit card at home when you go on leave or liberty.  You know exactly how much you’ll get on the 1st & 15th, so plan to spend a small fraction of that when you’re out in town.  

TIP: Start saving now!  “I started saving about 5 months before I got out and racked up a decent amount in just those last months because I managed my money well.” – Cpl Molina, Julie

Right now an E-1 w/ two years or less will receive $1,546.80 a month.  That’s almost $800 on the 1st & 15th.   Saving doesn’t mean taking $500 of each paycheck and putting it aside.  It should be closer to 10% of your paycheck.  Putting $80 into a savings account will not break your bank, or leave you stuck eating chow hall food for every meal.  

TIP: “Put 10 % away and take the TSP-discussion seriously.” –Sgt Hill, Keland

This tip was in almost every response I received when I asked, “What advice would you give the 18 year old version of you?”  This advice is NO JOKE.  At the beginning of my military career, I started putting in 3% in my TSP.  Then I went down to 1%, up to 10%, back down to 3%...  I ended up leaving the military with about $20k in my TSP.  The reality is that if I chose, and stayed with, 10% then I would’ve had closer to $100k.  THAT’S the power of saving for retirement.  

Stay tuned for Part 2!  

They Want Your Wallet

$49.5 billion. That’s how much was spent in the United States in 2014 for advertising.

And that’s only referring to the Internet ads! How crazy is that?! Society is exposing each of us to thousands of advertisements every single day, which are all designed by marketing experts to do one thing. Yes, you guessed it. They want you to spend your hard-earned money on their product or service, and on a consistent basis. These marketing professionals are leveraging big data and big budgets to increase their reach and resonance. They have even aided in the rise of neuroeconomics, which is the combination of economics, neuroscience, and psychology when used to determine how individuals make buying decisions. Basically, they are studying your brain in order better connect with your subconscious thoughts and desires! Kinda creepy, right?

Well here’s the deal - if there are folks out there who are ramping up their efforts (and budgets) to sell their ideas to our subconscious, then we need to ramp up our own efforts to ensure that our underlying spending habits won’t get us into trouble. Falling prey to impulse buying and wasting money on things we don’t really want or need is never a good feeling. Instead of leaving things to chance in our subconscious minds, we are better off by shifting as many thoughts and ideas related to money into our daily routine.

One way you can accomplish this is by having goals and affirmations. And once you do, write them down and place them on your fridge, in your desk, and at other spots you frequently visit. By reading your goals and affirmations regularly, your subconscious thought-patterns will more closely align with them. In result, there is less raw material for those sneaky marketers to latch onto, thereby decreasing the likelihood of you irrationally opening an account with DraftKings or ending up with a faulty blender from the QVC channel!


3 Steps to Your First Investment

Showing you that investing doesn't have to be scary or confusing

Emergency fund—check. Credit card debt demolished—check. All other debts paid on-time and in-full—check. Retirement contributed to—check. Extra money saved to begin your path toward becoming the next Warren Buffett with better hair—oh crap, how do I do that?

So you have that first $1,000 saved up—maybe more, maybe less—and you’re ready to jump on the investing train and grow your little nest egg. But how do you actually do it? How do you know where to put your money? There’s a lot of info out there, and a quick Google search will throw you into a whirlwind of analysis paralysis, get you all jacked up one minute and scared out of your wits the next. Suddenly, you throw up your hands and wait until you’re making a lot more money so you can hire someone to do this for you.

But what if you can DIY and start dabbling capitalizing on your money savings now? Here’s the deal, I’m giving you full permission to take this $1,000 and make this a learning experience. A “get your feet wet” investment, if you will. You don’t need to become a millionaire from your first $1,000 investment.

There, doesn’t that feel better?

So now that the pressure is off, these next three steps should be super easy for you to implement – Warren B, here we come!

Step 1: Choose your investment platform

Check out discount brokerages like Charles Schwab or Vanguard. Look up their cost per trade (you’ll want the lowest, obviously), and weigh that with how much you like their website and the information they offer. Remember, the best tool is the one you will regularly use. Through the platform, find index funds that you like, one for stocks and one for bonds, and invest based on your allocation in Step 2.

Another option is to invest through an automatic investing platform, or some may call them “robo-advisors,” like Betterment or Wealthfront. These are newer, startup companies with online platforms that offer super easy index fund investing with low expenses and easy transactions. They also offer advice on the allocation of your portfolio—which you can double check with Step 2.

I have one of each from the above groups—don’t beat yourself up. Just pick one!

Step 2: Choose your asset allocation

This has a lot to do with how soon you will need the money and the amount of risk you are willing to take on. For the sake of the length of this article, I’m going to assume you’ve done your due diligence, have your emergency fund up-to-snuff, and you’re ready to invest for the long-term, not for the car you want to buy next year—Don’t worry, we’ll discuss ways to make that happen another time.

The general rule of thumb for asset allocation is 100 minus your age. That is how much you will put in stocks, and the rest (your actual age) is how much you will put in bonds. For example, I’m 24—so I would put 76% of my $1,000 ($760) in a stock index fund and 24% ($240) in a bond index fund. This is a very general rule of thumb, so you can tweak as much as you see fit, but it will get you one step closer to having that first investment under your belt.

Step 3: Now hold onto your patient pants

I probably should have put this as a disclaimer at the bottom, but I guess I’ll just say it right here. This isn’t a get-rich-quick program or a way to beat the market. In fact, there are very few people who consistently beat the market year-over-year. So few, that it’s about as rare for me to become a WNBA player, in which I’d really have to work on my vertical. (If you’ve ever stood next to me, you’ll understand.) We’ll do a deeper-dive on this subject later.

For now, remember that we’re simply investing for financial freedom in the future. And by future, I don’t mean when you’re 25. Constantly checking your stocks will drive you crazy. I know it’s not very sexy, but short term fluctuations under 10 years means almost nothing. It takes several years to make that nest egg grow, baby, grow, and investing is a great way to do it–but you must be patient.

The Importance of an Emergency Fund and Saving for a Rainy Day

"A penny saved is a penny earned." - Benjamin Franklin

The Six Month “Cushion”

Life is pretty complicated and seems to throw you curveballs when you’re not looking. With this being said, it is becoming ever more crucial that you set aside extra money in case of an emergency. If you lost your job tomorrow, do you know how you’ll pay the rent next month? Who is going to pay that medical bill from when you broke your arm? How about that new tire for your car when you accidentally ran over some nails left in the road near a construction site?  Could you pay for those unexpected expenses without going into debt? For more than half of Americans, the answer is no. I’m willing to bet that most would pay those unexpected bills with a credit card, their savings account, or even pull money from their 401(k) accounts prematurely.  All three of those actions can severely hurt your financial future.

Experts have always recommended that you have at least three to six months’ worth of expenses set aside in your emergency fund in case of a financial crisis. Whether you unexpectedly lose your job or drop your phone in the pool, you need to be prepared for life’s emergencies. Any type of financial predicament that would force you to pull from savings or retirement accounts could be a detriment to your savings schedule, not to mention causing a considerable tax liability.

Squirrel Away for a Rainy Day

Saving for a rainy day and sacrificing upfront cash for an unforeseen emergency fund might sound like an absurd concept at such a young age.  As Millennials, we are notorious for thinking that nothing bad will ever happen to us.  Take a lesson from every adult who’s ever had to pay for something unexpectedly and stash away some money.  You’ll undoubtedly have to discipline yourself heavily and possibly even swap a night at the bars for staying home and renting from Redbox, but at least you’ll be able to sleep soundly instead of staying up worried about how you’re going to make your next credit card payment on time. One day, you’ll thank yourself for not spending every last penny you earned, and you’ll feel confident knowing that any emergency that comes your way won’t throw you into heavy debt.  Save small amounts of money to start, be consistent with your contributions, gradually increase the amount over time, and keep money separate from your checking/debit card account (either in cash or a separate account) to keep from spending it.

Building Your Emergency Fund

So, how do you start an emergency fund? First, you need to start with a goal, let’s say $1,000. This amount will be enough to kick-start your fund and get you through any of life’s hiccups.  You may be wondering, how in the world do I start with $1,000? Well I recommend you start with reading the book, 30 Days to $1K! Let’s set that as your goal right now. Every paycheck, add a pre-determined percentage of your income to this separate account, just like you would do with your savings account.  Depending upon your unique situation, you’ll want to calculate how many months it will take to reach your goal. To put it in perspective, let’s say that your net pay (after taxes) is $2,500 a month, and you set aside 10% of that for your emergency fund to get you up to speed. In four short months you will have reached your first goal of accumulating $1,000! You’ll also want to consider simultaneously paying down your debt as you increase your emergency fund.  By doing so, you’ll free up more of your income down the line and be able to increase your savings.  As mentioned previously, aim to save at least three to six months’ worth of expenses for your safety net.  Review your budget to determine how much you should ultimately stockpile in your fund.

On Deck: Fintech

We are in the early stages of the financial sector’s version of the Industrial Revolution.

The financial services industry is changing. Incumbent companies like Wells Fargo, Fidelity, and even your local bank are all seeing disruptive start-ups crowd their space. But what does this mean for you? Well, it means more choices and lower prices are on their way.

Fintech refers to these ‘financial technology’ firms who leverage the Internet and their expertise of other technologies in order to provide financial services to the masses. Many of them are based in Silicon Valley or New York City. Examples that you may be familiar with are Square, Venmo, or Robinhood (no, not the guy who shoots arrows). One thing that most fintech companies have in common is their motive: they want to disrupt the norm by being transparent, cheap, and easy for their customers. Since financial services encompasses a multitude of things, there are a lot of niches for fintechs to choose from. Some of them help small businesses set up retirement plans for their employees, while others provide advice and automation for individual investors.

Now I don’t know about you, but I often find myself in a predicament when it comes to personal investments. I always care about earning a solid return, but my attentiveness ebbs and flows when life gets busy, and my emotions can get the best of my decision-making process (darn you, Apple). If any of that resonates with you, there may be a fintech that can help. Many of them utilize algorithms that automatically rebalance your portfolio for maximum return potential while minimizing what you pay in taxes. Their websites and apps are intuitive and fun to use too! If you’re interested, click on some of these links to explore.

Happy Investing!



Why It’s Important to Start Tracking Your Net Worth

Talking about net worth isn’t just for the rich and famous. It’s important for everyone to be aware and conscious of where they are financially.


Tracking your net worth forces you to have an honest look at your current situation and it paints an accurate picture of where you stand financially.  Your net worth can be determined by simply calculating your assets (checking, savings, emergency fund, etc.) and subtracting your liabilities (credit card debt, student loans, car loans, etc.).

How much are you worth?  Do you have any idea?  Most people don’t, which is one of the main reasons why it can feel like it’s so difficult to get ahead in the money game.  We are always so concerned with our bills and monthly expenses that we tend to forget to focus on the most essential action of the game, paying ourselves first. Paying yourself first helps you to secure a move in the right direction by making sure before any expenses or debts are paid that you are setting aside funds for yourself. This helps you build up the assets side of the net worth equation. This also helps make sure that you don’t short change yourself at the end of the month where normally you save what’s left over and instead you’re spending what’s left after you save.

Don’t be alarmed if your net worth is in the red. These days with student loan debt at astronomical levels, the majority of the millennial generation is bound to start out with a negative net worth. What makes all the difference is the complete awareness of those liabilities and the focus that’s put on blasting away the debt as soon as possible.

Calculating your net worth regularly gives you an up to date snapshot that tells you which direction you’re heading. On any given month you can be moving forward, backward, or remain stagnant, depending upon your ability to earn income, pay down debts and spend within or below your means. Whether you are still in school or just starting out in the real world, tracking your net worth is an essential piece of your financial foundation and a great start to winning the money game.

Broke From Go -- Why Graduates Today Are Cash Strapped And What To Do To Fix It

There are very few graduates today that would lump themselves in the “average” category.  

Average debt, that is.  

According to The Institute For College Affordability and Access student loan debt survey in 2014, the average debt load carried by an undergraduate was just shy of $30,000.  Yet, when seemingly “average” recent graduates were asked, their debt loads were at least 1.5 times that if not more.  (And that’s before taking into consideration the credit card debt many are carrying...)

In essence, they’re Broke From Go.  From the time these young people graduate, they are far more cash strapped than any previous generation.  Couple this situation with a difficult job market, a wildly fluctuating stock market, and a depressed housing economy -- it’s no wonder the next generation is bucking the status quo.

I had an intern named Brandon who recently said to me (after I had him investigating some statistics on student loan debt), “Can this be right?  $200 a month payments for 10 years on $10,000 in student loans?”

He went on to discover that he’ll need a salary of $133,000 a year to “afford” his student loan payments once in repayment status.  

Know of any companies looking to hire a recent Liberal Arts graduate for 6 figures?  

I didn’t think so...

Such is the case with many students who’ve been sold a bill of goods as to the value of their degree.  The fact of the matter is that many two year institutions are graduating 20 year olds with degrees in high demand like nursing, telecommunications, lasers, and welding.  Many of whom are grabbing jobs paying in excess of $50,000 a year.  

Which begs the questions:

  • Why are all of these people getting 4-year degrees?

  • What is the point of racking up high 5-figure debt loads?

  • When is our higher education system going to change?

  • Who else is seeing this problem and what are they doing to change it?

So, what are we to do about this cash-strapped generation?

First of all, encourage those who don’t know what they want to do to attend a two-year school and get their general requirements out of the way.  It’s more economical and quite often, the classes are easier to get into than a larger institution. Considering 1 in 3 students will not finish their degree, a community college is the most economical way to get the first couple of years under their belt. It’s a relatively inexpensive way to dip your toe in the water of higher ed, so to speak.

Guide them in gaining experience through internships so they get a sense of what they really enjoy doing.  At that point, see if it makes sense to pursue the four year degree.

More loans are not the answer. 

Our administration thinks that making student loans more accessible is the answer to our problems.  What we need less of right now are cash strapped twenty-somethings. This is one of the most entrepreneurial generations to have ever appeared on the scene and when they’re in debt, they aren’t as prone to start successful businesses.  

The single best way to fix the problem is to educate those in the middle of it. It is up to the institutions, the families, and the individuals to seek out every educational opportunity to ensure students make wise and educated decisions when it comes to money.  



Money in Your 20s: To Rent or To Buy?

5 Questions to ask yourself before making that big buy decision

So, you’ve graduated from college and you’re now making that sweet steady paycheck you’ve worked so hard for the past four years. You’re bringing in a whole lot more money than what you had back when you worked that work-study barista job in the caf (ahem, you can now afford the party pack of pizza rolls) and you’re thinking about taking that next big step from “college student” life to “real world adult” life.  You’re ready to buy yourself a home because… that’s what adults do, right?

Well, at least that’s what most adults think they should do. And this might be the right decision for you, but not without asking yourself a few questions.

1. Are you sure buying a home is a GREAT investment?

I know what you’re thinking, “but my grandma bought her home for $30,000 and now she’s selling it for $650,000!!” You make a valid point. That is a nice investment. But keep in mind your grandma also probably lived in that home for 40 years. If you’re looking for an investment opportunity and you’re willing to be patient with the returns and upkeep, you may be in the right place.

2. Will anyone help pay your mortgage?

You can live for free or even make money off of your property if you plan strategically. I have friends who have bought homes and collect rent from roommates who rent out their spare bedrooms. The rent covers my friend’s mortgage and sometimes gives them a little extra income on the top. My rationale behind buying a home is to make sure that, no matter what, someone else is paying down at least the interest on the mortgage. If you can get make that work, you may be making a sound decision my friend.

3. How long do you plan to live there?

Even when you think, “this is it—I’ve finally made it as a yoga teacher in the country, ready to settle down in my adorable little bungalow on a hill with a hammock and a glass of iced tea”. (anyone…?) Suddenly, we get curious and find ourselves in a quarter-life crisis where bungalows are no longer fulfilling and we’re headed to the big city to fight (hypothetical) fires, drink far too much coffee and hardly sleep in our high-rise condo overlooking the taxis below.

See? Life changes in an instant, but home buying and selling does not always happen as fast as we may want or need it to. Remember your rich grandma from above? It takes some time to get that return out of your home–so if you don’t plan to live in the property for very long and you don’t have the means to rent it out for some extra passive rental income when you’re gone, then maybe the bungalow wasn’t worth it (as glorious as it sounds).

4. Do you have any other debts?

I will preach what my daddy always preached to me growing up. “Get rid of your debts because the last thing you want is to owe someone something that you don’t have.” I know, it sounds harsh, but it’s true. If you have other debts out there with your name on ‘em, keep your living expenses as low and predictable as possible, and focus on blasting away your remaining balances—you’ll be happy that you did.

5. What does your savings look like?

Don’t forget your closing costs, lawyer fees, appraisal fees, any upfront insurance or taxes you might need to pay, and the list goes on. These are the extras you’ll be paying on top of your down payment when you buy your home. Having a hefty reserve for unexpected repairs or replacements is also pertinent for responsible homeownership. No one ever said being a grown up is easy—which is exactly what my neighbors said to me after my bathtub started dripping on their heads within my first month of being a condo owner. **winks and flashes a cheesy boy scout “always be prepared” smile**

What is a Credit Score

What is a Credit Score? 

If you're starting on your journey to financial freedom & financial literacy, you might've heard about something called a Credit Score.  If you're ever planning to borrowing money to purchase a home or a car then you need to understand what a credit score is & how it affects you.

Your credit score, aka FICO score,  is a three-digit number derived from a mathematical algorithm using information in your credit history.  In other words, it's a snapshot of your personal borrowing and repayment history.  Lenders (and sometimes, landlords, companies & utility companies) use this score to assist them in determining the risk of lending you money.  Your score will range somewhere between 300-850.  The higher your score, the more likely you are to be approved for a loan.  Adversely, the closer you are to 300, the more you are considered a high risk.    

How is your Credit Score calculated?

Going into the equation of calculating your credit score can be complicated, so let's simplify it to make it less scary.

Payment History: (35%) Did you make payments on time?

Amount Owed: (30%) Do you have $900 loan, or $9,000?

Length of Credit History: (15%) Have you had a credit card for 5 years, or 5 months?  How often do use those them?

Types of Credit Used: (10%) What kinds of accounts do you have?  Installment (ex. auto/student loan, mortgage), revolving (ex. credit cards, lines of credit)?  

New Credit: (10%) How frequently have you applied for credit?

All this information, which is contained in your credit report, determines your credit score.  When a company or organization needs to check your score, they generally will check with one of the three main credit bureaus; Experian, TransUnion, and/or Equifax.   Since these credit bureaus are separate entities, it’s possible that one or all of them might not have all of your information.  This can negatively affect you if a lender gets an inaccurate credit score for (this can lead to higher interest rates for you To ensure accuracy, you can contact any/all of the bureaus and request a copy of your report. If you find any errors, you can contact the reporting agency again to correct the mistakes.


Your credit score is a representation of the likelihood that you will repay your debt.  The list of people/organizations that use your credit score can include credit card companies, banks, credit unions, financing companies, mortgage lenders, landlords, utility companies, cell phone companies, etc.  You can safely assume that it's vitally important to be knowledgeable about your score, and what is affecting it.   



Hacking Your Student Loans

Adam Carroll on Student Loans 

Every month you make that dreaded student loan payment, a reminder of the fun you had during your “four year break from reality” that was college. It’s the price that millions of graduates (and millions that didn’t graduate) are paying to pursue that prized slip of paper that allegedly is “the ticket to a good life”. Or is it? Spending 15-20 years of your life paying off these debts at a few hundred dollars a month is frustrating and may be distracting you from your true calling.

However, the good life is not that far off if you understand how to hack the student loan system. Each factoid below is followed by one or more hacks that can help you get rid of that student loan debt once and for all!

HACK: Make advance payments to principal

Most students don’t realize it, but as soon as the money you’ve borrowed is disbursed, the interest begins accruing (on non-subsidized loans). That is why the amount you owe is so much larger than what you remember borrowing – it includes ALL of the interest from while you were in school.

A recent graduate was frustrated that of the $250 payment they sent in, only $90 of it was applied to his principal balance. In reality, less than ½ of all of your payments for the first few years go to pay down principal, the rest goes just to cover interest.

Because the interest accrues daily, lowering your principal balance is paramount to shortening both the length of your loan AND the amount you pay in interest. Interest is calculated based on the following equation:

Interest rate × current principal balance ÷ number of days in the year = daily interest

By sending in additional payments, you lower the current principal balance, thereby lowering the daily interest charged. If you’re in a position to send extra money with your payments, make sure you do the following:

  1. Make absolutely certain that your advance payments are being applied to the principal of your loans AND NOT applied to future payments. Student loan servicers are notorious for doing what is in their best interest, not yours. Therefore, they will apply any extra amount you send in towards offsetting when your next payment will be due. You will more than likely have to call the servicer directly and make sure they apply the payment you send in where you want it. Tell them it is to be applied to principal reduction.
  2. When sending in additional payments, direct the servicer to apply the additional principal to either the loan with the highest interest rate or the loan with the smallest loan balance (just pick one). By paying down the loan with the highest interest rate, you’re automatically charged less in interest because of the above equation. Keep reading to find out why you’d choose the smallest balance.

HACK: Payoff smallest balances first & attack each one individually

Consolidation is great if you’re able to lower your interest rate substantially. Lowering the interest rate will obviously lower the overall amount you’re paying over time. However, as the name suggests, when you consolidate, you’re taking all of your separate loans and putting them together into one big loan that can never ever be adjusted again.

By NOT consolidating, you can direct additional payments to one loan at a time and knock them each out sequentially, relatively quickly. Here’s why that’s important:

Let’s say you owe $40,000 total and your payment is $300 a month. You more than likely have some smaller loan balances that are part of the overall payment you’re sending in. If the loan balance on one of the smaller loans is $1,000 for instance, and you’re on a 15 or 20 year payback schedule, the amount of your payment that’s going to principal might only be $8-12 per month (on that loan). But, if you have an additional $200 a month that you’re throwing towards your payment, you could have that one student loan knocked out in 5 months or less.

What would you rather toast a piece of bread with – a flashlight or a laser beam? When you blast away one debt at a time, you’re taking a laser beam to each individual debt. Pay the minimums on every other loan except the one you have your sights on. It creates a tremendous emotional win each time you get to cross one off the list!

HACK: Use real estate to wipe away debts in your mid-20’s

If buying a home is in your future, consider a strategy that will help you build cash flow, equity, AND knock out your student loans. Here’s how:

Duplexes can be purchased using an FHA loan when the person buying it is also living there as their primary residence. This requires 3.5% down on the purchase. Consider finding a duplex that may require a bit of fix-up work so that you can get it at a great deal. Contact a realtor and let them know that you’re looking for a duplex to buy owner-occupied that’s below market because of it’s condition, knowing that you’re going to put in some elbow grease to fix it up.

If you buy it under market value, you’re walking in with a bit of equity. By renting one side of the duplex and the other room in the side where you reside, you’ll create some cash flow (probably enough to offset the mortgage payment). What you would normally spend in rent/mortgage is freed up to blast away debt!

But it gets better. Assuming you bought the house right and it’s grown in value over the year, you can get the place re-appraised after 9-12 months and borrow from the equity in your home to pay off some of the debt. By using a cash-out refinance, you’ll transfer some of the equity from your duplex into paying off the loans. Because mortgage interest is deductible, is generally at a lower interest rate, and is amortized over 30 years, the result on your finances is positive – lower overall payments, more interest deduction, and less interest paid.

HACK: Other debt is…

This hack comes with a caveat: it is purely an observation, NOT a recommendation!

After several years of paying back his nearly $300,000 in student loan debt, a dentist applied for every credit card that was available to him and did cash advances on each one pulling out well over $250k. With the money he… you guessed it, paid off his student loan debt and then promptly declared bankruptcy.

In the last decade, the bankruptcy laws changed protecting creditors from borrowers declaring bankruptcy and wiping out student loans. Everything else is still fair game. So, technically, while you can’t bankrupt student loans, there are other loans that could be bankrupted.

Why you shouldn’t do it: It screws up your credit for a solid 7 years. Forget buying a home with a decent interest rate, plan on driving the same car for awhile… and, there’s the moral issue of you DID borrow the money in the first place.

The bottom line is there are ways around, over, and through student loan debt. It requires the borrowers to be pro-active, to live on less, to accept responsibility for taking care of their debt, and a great deal of perseverance!