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Stock Market Crash Of 2020 Coming Soon? (And How I Am Preparing)

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(The following is a transcription from a video I recorded. Please excuse any typos or errors.)

In this article, we’re going to talk about whether or not there’s a Stock Market crash coming soon.

And just like anyone else, I don’t know. I have my opinions and we’re going to talk a little bit about those. I’ll also give some of the reasons, three reasons, why I think we are probably going to be seeing a market crash soon. Considerably bigger than what we saw in February.

I hope that I’m wrong. I really do hope that I’m wrong. I’m not trying to be a doom and gloomer. I’m not trying to be any of those things, but there’s some writing on the wall and I think it’s naive to pretend like it’s not there. And, I don’t want to do that and that’s kind of where we are with everything.

If you would like to watch this Stock Market discussion, you can view it here:

First, I’ll talk about the three different things that all clicked for me. Where I’m going to start preparing for a Stock Market crash because I think the likelihood of this happening is getting higher and higher.

And then after we discuss the three reasons why, we’re going to discuss the five things that I’m doing to actually prepare for it.

First Reason

The first reason on this list is a New York Times article I read, titled “Worst Economy in a Decade: What’s Next? Worst in our Lifetime.” And I’m not an economist by any stretch of the imagination, but you can kind of see what’s going on here. Long story short, the Gross Domestic Product (GDP), and this in the first quarter of this year, dropped by 4.8%.

And there’s a couple of different things here. What that means for us, is that this is the first decline in GDP in the U.S. since 2014. And it’s the worst quarterly contraction since 2008 when the country was in a deep recession.

According to the writer in this article, he then interviewed a chief economist for a credit insurance company. In which he said, “The worst is yet to come.” Because the first quarter ended on March 31st (when a lot of the actual problems that have happened from this whole epidemic or pandemic), and then April 1st is when the second quarter started. Then all the bad stuff really started kicking into gear in April. And so what we have going on is most likely the second quarter of this year is going to be way, way worse than this first quarter in terms of GDP.

This guy goes on to say that this is going to be the worst in our lifetime. He said, “They are going to be the worst in the post World War Two era.” And besides that, there’s a couple other things they talk about here. Consumer spending fell by 7.6%. And again, this is the first quarter. It’s going to be way, way worse. On top of that, 30% of auto sales were down. Just so many different things.

But, the GDP alone is not super solid reason to base the potential of a Stock Market crash. That in and of itself doesn’t make me think, “All right, there’s a problem.” It’s just the GDP.

Second Reason

But this Business Insider article, pulling that in with the above article, is really, really interesting to me.

I’ve been a student of Warren Buffett for a long, long time. Warren has this ratio that he uses. Which is basically, probably the best, the single best measure of where valuations for the market as a whole come from. He said, “This ratio is probably the one thing if you’re going to look at anything to see whether the market is puffed up and ready to collapse, this is the one thing you should look at.”

Warren also said that, “It’s a very strong warning signal when the indicator peaked.” And he said this right before the “.com” burst in the late 90s and what we had happened then.

Let me tell you about this metric, it’s called Buffett Indicator. They’ve named it after Warren because he talks about this metric all the time. He says, “It takes a combined market capitalizations of a country’s publicly traded stocks and then divides it by the GDP.”

We were just talking about the GDP in the above article. Which dropped by 4.8% in quarter one, which is likely to go way beyond in quarter two. So with that ratio, he says just before the “.com” bubble burst in 2000, it’s surged to 118% for that ratio. And so that was the big warning sign that something was going to come.

In 2008, right before the financial crisis (the big recession we had at that point), it went over 100%. And as of quarter one of this year, with that GDP dropping 4.8%, it is at 180%.

So, in 2000, or right before the “.com” bubble burst in 2000, it was at 118% and now it’s at 180%! So yeah, it’s just way, way higher than it should ever be. And it’s just a very big warning sign of things to come.

The Buffett Indicator

Here’s a chart to show you The Buffett Indicator. It shows the “.com” burst of 2000. As well as the recession of 2008. And just look where we are right now in 2020.

After 2020’s quarter two, when all this stuff comes out at the end of June (when we see quarter two results), I think this indicator is going to be way up there. If it hasn’t crashed already.

Third Reason

And then you think about the reality of what this all looks like. In our town, we’re starting to open the doors up a little bit and people are starting to go out again. They’ve opened up restaurants, but there’s still social distancing in restaurants and people are wearing masks.

The point is the transition out of this, and I think we all know this, is not a flip a switch and now we’re all done back to normal. This is a long drawn out process that I think is going to continue. It’s just going to take a while.

I have a lot of friends, being in Nashville, who are musicians (touring musicians). And they’re like, “I can’t imagine we’re going to play a show this year.” How is a concert going to happen with social distancing? What does that look like?

I think we’re all trying to figure out optimistically what church is going to look like, hopefully soon. But a concert? When is that going to happen again? Anyway, point is that this is not going to be something we’re just going to fly back out of. And as a result, all of these things, all of these problems are just going to spread and just take a while to come back.

On top of that we’ve added, I think, $2 or $3 trillion to our national debt. So what does that mean? There’s so many brilliant economists who can talk for hours about this and that’s fine. I have people emailing me all the time who have massive overspending problems. They are adding $1000s a month to their credit cards and are just way upside down. So how do you get out of this? Where do you think this is going to end? But if you apply just a little bit of common sense to this, we can see where this may be going.

Just imagine yourself, and don’t think just about the right now, but look down the road six months or even two years. Where do you think this is going if you continue in this pattern with this habit? Anyone can see this is not going to end well. There’s going to be a crisis here. Something bad is going to happen, and that’s where we are as a country with our national debt. And the debt was huge before, and it’s just gotten so much bigger and it’s just going to continue to get bigger.

On YouTube, my wife Linda and I discussed a $2000 a month stimulus package that has been proposed. It would be $2000 a month per person over the age of 16 for six months with the option to extend for 12 months. So literally every American over the age of 16 will get $24,000 given to them by the government. This probably won’t happen. But the point is that our government is just going to keep trying to do whatever they can do to solve this problem.

I’m not saying that we shouldn’t try to fix it, but the problem is … It’s a BIG problem. And, I don’t know the answer and I don’t have the solution. All I’m saying is it’s becoming easier and easier to see this and realize that something is going to happen, something has to give.

How I’m Preparing

For me personally, I have concluded that I’m going to start doing a little preparing for what could be a bad crash. Who knows, maybe as bad as the Great Depression. What would that look like?

I’m asking that question, not because I want to sit and be negative and focus on the negativity, but I also don’t want to be naive. I have grandparents who lived through the Great Depression. What did they learn that we know nothing about, or my generation knows nothing about? That would be good for me to be thinking about at this point.

And I would rather be thinking about it now than thinking about it a week after it happens, and try to think “How can I prepare for that?” So with all that said, let’s talk about five different things that I’m doing to kind of prepare a little bit.

First Thing

One of the things I’ve done is that I’ve sold off a lot of our stocks, and the reason being is because I’m convinced more and more that selling off your stocks all the time just because you think something might happen and trying to time the market is just generally a bad idea. Most people will suggest that and I agree. It’s not a great idea to try to time the market. But, on the other hand, I’m becoming more and more convinced that the odds of something bad happening sooner rather than later are pretty high and I’m willing to take the risk of missing out on the gains as we come back out of this thing, to be better positioned to reinvest or survive, if need be, when that situation happens.

Now, we’ve held onto a few different stocks that made sense to me. One of which was Amazon. I think Amazon is going to come out of this looking pretty good. It seems like everybody’s complaining about how long it’s taken to get their orders from them, but the reality is that they have met the demand really, really well.

And a lot of people would be in really big trouble if it weren’t for Amazon. Not to mention that they just hired 175,000 new people. So they’re supplying work to such a large percentage of our country as well.

Someone was just asking about Amazon earnings. Bezos did come out to the shareholders, and said, “We’re basically going to reinvest every ounce, every dollar of profit that we got,” or something like that. I forgot what he said exactly.

So shareholders might not be happy and the stock price might come down for a little bit, but I think long term, which is exactly how Bezos thinks. He went like 15 or 20 years without making a profit because they just continually invent reinvested, and so he thinks very long term. And I think long term, it still makes a lot of sense.

Second Thing

Another thing I’m doing is I’m building up our savings. If I had debt that I was paying off, that would be something that I would be thinking a good bit about as well. But I would be even more concerned about having a good, solid emergency fund built up. And so what we’re doing is with some of this money that’s coming, this stimulus check. We are going to use some of it, but a lot of it’s definitely going to savings just to continue to build up that buffer. I just want to be as well positioned as we can be for something that may happen.

Third Thing

Another thing that I have been doing, or I’m not stopping doing, is buying a little bit of cryptocurrency. Which might sound weird, but I think it’s just interesting. It’s a little bit of a gamble, but I think it’s a little bit of a hedge.

This is what my thinking is, that it’s a little bit of a hedge against what’s going on. And if we have a really bad Stock Market crash, where whole currencies are just clobbered and with the United States dollar just continuing to give out all this money, the power of the dollar is just not going to be nearly as strong. And with cryptocurrency just being an independent currency that’s not attached to any one country.

It’ll be interesting to see. Cryptocurrency fared fairly well through this thing. It definitely went down with the market, but some of what I was reading was that that was actually because a lot of institutional investors like mutual fund managers and things like that were selling off all their positions in their cryptocurrency as soon as all that happened.

I have no idea what’s going to happen, but this is one thing that we’re just continuing to do a little bit, purchasing cryptocurrency.

Fourth Thing

Another thing we’re doing, is stocking up on food. And not in a hoarder way, or filling our entire closets in our bedroom with canned goods. But just buying food that’s on sale, shelf stable food that’s on sale, is just one of the best investments that you can make. You know what I mean?

Food is something that you’re going to buy anyway, and if you can get it for 25%, 50% off when you buy a bunch of it on sale, why not? And the reality is that buying when you’re not in a time of crisis and just continuing to buy a little bit more than you need to stock up your shelves, that’s completely fine. But if as soon as the crisis hits you run to the store and clean out all the toilet paper then you’re a bad guy and everybody hates you.

I think the smart thing to do is, in a time of peace when there’s not a problem (like right now), just continue to buy a little bit extra than what you need each time. Or if something’s on sale, really stock up. We have a deep freezer so we filled that up with a lot of meat and things that can last for a long time and we’ll try to get it on sale. And it’s just, in general, a good investment.

The reality is, we learned a lot from this pandemic that we’ve gone through the last couple of months. Just seeing a little bit of a market, I wouldn’t call it a crash but just a hiccup, a little bit of a market contraction and problem. And just learning everything that we’ve learned from this, we got to see how society responded. Toilet paper apparently is the answer (so buy your paper now that it’s back on the shelves), but seeing that and seeing how people respond and what are the in demand items.

It’s just been really enlightening, and it’s a good educational thing for us to prepare for what may be to come in the future. So those are the practical things.

Fifth Thing

I don’t like being a doom and gloom type person. I don’t like talking about the negative as I’m a very optimistic person. But I think the most important thing and the thing that we should be talking about and focusing on the most, because, is we need to get in The Word more.

We need to be in the Bible. This is the thing that’s going to strengthen us and being strong for situations like this. Being strong in The Word, being strong in Christ, is the thing that we need to be able to handle these situations. Whatever the thing is, regardless of whether it’s our own personal crises because we lost our job or a big, broad economic one, that’s affecting everyone, the best thing that we can be doing is being strong in the Lord.

The more that we get into The Word, the stronger that we’re going to be and the better we’re going to be able to handle this. I want to be like Jesus when he was asleep in the boat in the middle of a hurricane and all the apostles are freaking out saying, “We’re going to die, we’re going to die,” and Jesus was asleep.

What would it look like to have that much confidence and that much trust in the Lord? Regardless of what’s going on, we can be at rest and we can be taking a nap in the midst of the storm. You know what I mean? For me personally, that’s where I want to be. And so that’s why I’m really doubling up my Word intake and really trying to, most importantly, get strong in The Word.

So we mentioned some of the practical things we can do to prepare, but to be honest, if I’m not solid in the Lord, it just doesn’t matter. All that stuff just does not matter. I would so much rather have none of the practical basis covered but be in a really solid position spiritually to kind of be able to weather those storms.



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What is Adjusted Gross Income (AGI)?

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If you’ve read a bit about personal finance, chances are that you’ve heard the term Adjusted Gross Income (AGI). A fair bit of tax considerations are based on AGI, so it’s well worth familiarizing yourself with the term. Here’s a quick introduction to AGI and when you might need to consider yours.

Calculating Adjusted Gross Income

The IRS defines AGI as “gross income minus adjustments to income.” That’s not exactly a helpful definition. It doesn’t tell you what gross income is or what adjustments must be subtracted.

Your gross income is simply the total amount you receive in a given year. It is not limited to wages or salary. It includes wages, salary, bonuses, dividends, royalties, interest, business income, pensions and annuities, capital gains, and alimony you’ve received.

Turning to adjustments, here’s a brief list and description of common adjustments accounted for in your AGI:

  • Certain expenses incurred by performing artists
  • Certain expenses paid by teachers for books, supplies, and other equipment
  • Certain travel expenses paid by members of the reserve components of the armed forces
  • Losses from the sale or exchange of property
  • Some costs associated with rental income or royalties
  • Qualified retirement savings
  • Alimony
  • Jury duty pay remitted to your employer
  • Clean fuel vehicle deductions
  • Moving expenses
  • Student loan interest
  • Higher education expenses
  • Health savings accounts

Why AGI Matters

Why does your AGI matter? Well, the IRS uses your AGI to determine whether or not you qualify for certain deductions and credits. For example, the IRS allows you to deduct medical expenses that exceed 7.5% of your adjusted gross income. In another example, qualifying for the Earned Income Tax Credit means falling under the income limit that applies to you, and all are based on adjusted gross income.

There’s yet another term you might hear thrown about, one used for a few other tax calculations: Modified Adjusted Gross Income (MAGI). MAGI refers to your AGI with modifications. What these modifications are can vary and the tricky thing is that there’s not a single MAGI—there are various MAGIs used for different purposes. And each comes with its own set of modifications. A few common modifications include tax exempt interest and the excluded portion of Social Security payments.

You should be cognizant of what you expect your AGI to be at the end of the year, particularly if you receive income throughout the year that you do not initially pay taxes on. Knowing what you AGI will turn out to be will help you plan for the coming tax bill. If your tax situation is simple, this probably won’t require much attention. If you and your spouse are both income earners, your AGI will be roughly the sum of your salary less retirement savings.

If, on the other hand, you work an income earning job, pay alimony, run a small business part time and own a rental property, it’s a good idea to think ahead about what your expected AGI is. This will help you know your marginal tax bracket and plan for tax expenses. The last thing you want is unexpected tax bill you can’t pay.Your adjusted gross income is one of the most important figures to know for tax time. Find out how to calculate yours and how it could affect your taxes.

The post What is Adjusted Gross Income (AGI)? appeared first on The Dough Roller.



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Here’s Your Plan to Retire in Ten Years

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The average American has only a little over $200,000 saved for retirement by age 65. It’s a small wonder that 50% of married couples and 70% of individuals receive 50% or more of their retirement income from Social Security.

But that doesn’t have to be you. In fact, you don’t even need to wait until you’re 65 to retire. It’s possible you can retire in 10 years – as in 10 years from where you are right now. It doesn’t matter if you’re 25, 35, or 45, with the right mix of discipline, commitment, and financial strategies, it’s a goal you can reach.

Many thousands of others have already done it, which means you can too. And you can do it even if you have no money saved for retirement right now.

Here’s how…

But first, let’s touch on a few important concepts.

Determine “Your Numbers”

What are your numbers? The amount of income you’ll need each year to live in retirement, and the amount of money you’ll need in your portfolio to produce that income.

Let’s say you decide you’ll need $40,000 per year to live in retirement. It’s possible to determine the amount you’ll need to have saved to provide that income.

It’s known loosely as the safe withdrawal rate. It’s a theory mostly, but one that’s been shown to be reliable in a number of studies.

It holds that if you withdraw it no more than 4% from your investment portfolio each year, you’ll have an income for life, and your portfolio will remain intact.

It works something like this: if you earn an average of 7% on your portfolio in retirement, and withdraw 4% for living expenses, that will leave 3% in the portfolio to cover inflation.

If we look at the rate of inflation going back to 1990, it ranged between 1.1% to 5.3% per year, with an average of something less than 3%. Over the past 20 years the average has been closer to 2%. But since early retirement will bring long-term planning consequences, let’s go with 3% as an average.

Can You Earn an Average of 7% Annually for the Rest of Your Life?

Investing is all about playing the long-term averages, and that’s what works in your favor.

Here’s how:

The average return in stocks has been about 10% per year going all the way back to 1928. It varies quite a bit from one year to the next, but that’s the return you can expect over 20 or 30 years.

Meanwhile, safe investments, like high-yield online savings accounts, are currently paying between 1% and 2% per year. But to be conservative, let’s go with 1.5% for our calculations.

If you create an investment portfolio comprising 65% stocks and 35% in high-yield online savings, you can achieve a 7% average annual return.

Here’s how it breaks down:

65% invested in stocks at 10% per year will generate a 6.5 % return.
35% invested in high yield online savings at 1.5% per year will generate a 0.525 return.

The combination of the two will produce an average annual return of 7.025%. That will allow you to withdraw 4% each year for living expenses and retain the remaining roughly 3% in your portfolio to cover inflation.

Why have only 65% in stocks when a higher allocation will get you a bigger return?

If you’re planning to rely on your investments for the rest of your life, you’ll need to build some safety into your portfolio. A 35% allocation in safe assets means that even if the stock market takes a big hit, your portfolio won’t go down with it.

Another important point on this front is that though interest rates are low by historical standards right now, that situation could change. If interest rates were to return to 5%, the savings allocation would make a much bigger contribution to your annual returns, and do it risk-free.

Back to “Your Numbers”

Now that you can see how the 4% safe withdrawal rate works mechanically, it’s time to determine your portfolio number.

If you need $40,000 in income, you can determine your portfolio size by multiplying that number by 25. Why 25? If you really like math, you can divide $40,000 by 4%, and you’ll get $1 million.

But for those of us who don’t like mathematical formulas and number-crunching, it’s easier to simply multiply your income number by 25 to get your portfolio size.

If you multiply $40,000 by 25, you’ll get $1 million. It’s just a simpler calculation, and it’ll get you to the portfolio amount you need quickly.

Commit to Your Numbers

I’ve used $40,000 as an income number for retirement, but it’ll be different for everyone. For example, if you have other income sources you expect to continue in retirement you may need less. But if you want a little bit more fun and luxury in your life, you’ll probably need more.

I’ve only used this number as an example. You can come up with an income number that will work for you. As you can see from my calculations above, your portfolio number will be determined by your income number.

You’ll need to know both.

For example, if you think you’ll need $50,000, you’ll need to build a portfolio of $1.25 million ($50,000 X 25). If you’ll need $100,000 in income, your portfolio will need to reach $2.5 million ($100,000 X 25).

To reach your goal, you’ll need to work toward three objectives:

  1. Saving the money needed to build your portfolio.
  2. Earning a return on your investments that will not only help you build your portfolio, but also keep it growing once you retire.
  3. Implement spending reductions and controls that will enable you to live on what will probably be less money than you are right now.

If you plan to retire in 10 years, you’ll need to commit to all three. Your retirement income and portfolio numbers must serve as a guiding light from now on. As you can easily imagine, retiring in 10 years is a tall order. You won’t get there by taking shortcuts. You’ll need to achieve all three objectives to reach your goal. That’ll take a 100% commitment but it’s the only way to make it happen.

Now let’s look at creating a timetable.

Year 1: Set the Plan to Start Saving

The average person probably saves between 10% and 15% of their pay toward retirement. But if you hope to retire in 10 years, you’ll need to save a lot more. Like 30%, 40%, 50%, or even more.

That’s going to take more than a little bit of sacrifice, and it may not happen right away. That’s why you may need to commit the better part of the first year to getting this phase in full working order.

The best way to start is by implementing a budget immediately. If you’ve never done that in the past, you may need to get help. You can do that by selecting a budgeting application that will show you how.

Your budget should include a generous allocation toward savings. It’s possible that at the beginning of the year you’ll only be able to commit to 15% or 20%. Don’t be discouraged – that’s an excellent start if you’ve never been a saver in the past.

But as you move forward, you’ll need to increase the percentage. For example, you might start by saving 20% of your income. But you can double that percentage by increasing it by 2% each month for 10 months. That will get you to 40%, which may work for you.

If it won’t, commit to continued, gradual increases in savings, even if you have to move them into Year 2.

You should know that anyone who’s committed to a high savings level has found that it gets easier over time. That’s why it’s so important to start in the first year.

Year 2: Focus on Increasing Your Income

There are two ways you can do this: increase your job income or create additional sources of income.

Let’s look at the benefit of each.

  1. Increase your job income. Early retirement shouldn’t mean abandoning your career plans. By continuing to move forward on your job, higher income should follow. That will provide the extra funds to save even more money. But there’s a second purpose for building up your career. If for any reason you may need to rely on a source of earned income when you retire, returning to your current career can be the easiest and most profitable way to make it happen. Most likely, you’ll be able to work in some reduced capacity, like part-time, remote work, contract, or freelancing within your industry, or even with your current employer. Continuing to increase your income on your job will also help if you find it will take longer than 10 years to reach your retirement goal.
  2. Create additional sources of income. What I’m talking about here is creating a side hustle to go along with your full time job. Not only will this generate an additional income while you’re preparing for retirement, but it can also provide a valuable postretirement income source. That would keep you from needing to go back to your current career to earn additional income. One of the best ways to create a side hustle is by making money online. It will not only enable you to make money no matter where you choose to live after retirement, but it holds the potential to make a lot of money. I’ve managed to create seven different income sources using this method. You can do something similar. Begin building a side hustle in Year 2, and you’ll have plenty of extra income when retirement arrives.

Year 3: Focus on Increasing ROI on your Savings

By Year 3 you should be committing to learning all you can about investing. The more you know, the higher your investment returns will be. It will not only enable you to build your retirement portfolio faster, but it can also provide higher returns when you finally retire.

There are ways you can increase your returns, largely by moving into different investment platforms.

For example, if you want to dramatically increase your fixed-income earnings, investing at least some of your bond portfolio in Lending Club can increase your interest income dramatically. Many investors are reporting returns of 7% to 10% per year.

You may also want to allocate part of your stock portfolio toward some type of real estate investing. That will not only provide high returns, but it will also diversify your portfolio in years when stocks are not performing well. Real estate crowdfunding platforms, like Fundrise can provide returns similar to stocks, and sometimes higher. Check out the many different ways you can invest in real estate to improve your return on investment.

If you’re not having much luck with investing, or you don’t have a serious commitment to it, look into investing through a robo-advisor. Those are automated, online investment platforms that provide full portfolio management for a very low fee. That includes building your portfolio, rebalancing it as necessary, reinvesting dividends, and even minimizing your investment-related taxes.

A robo-advisor like Betterment can manage your portfolio for 0.25% per year. That’s $250 for a $100,000 portfolio, or $2,500 for a $1 million portfolio. But if you’d like investing with a more personal touch, you may want to consider Personal Capital. They charge a higher fee, at 0.89%, but also provide financial planning advice, as well as regular access to live investment advisors.

Year 4: Focus on Reducing Your Spending

Cutting your spending is a strategy that needs to be implemented in Year 1. But those reductions will need to become progressive as each year goes by. And it’ll be even more important as your income grows, since there’s always a temptation to spend more as you earn more. That process even has a name – lifestyle inflation. You’ll need to avoid it.

The purpose of reducing spending is twofold:

  1. to free up more money for savings
  2. to lower your cost of living in anticipation of retirement.

Both are equally important. But the second part may be even more so. That’s because early retirement almost certainly requires you to change lifelong spending patterns.

For example, if you’ve been used to living in a large home, driving a late model car, and taking expensive vacations, it may take you several years to unwind those patterns. Put another way, you’ll need to find less expensive ways to create an enjoyable life. And you’ll need to have that well underway before you finally retire. Unfortunately, retirement and an opulent lifestyle are incompatible.

Focus on ways you can reduce your spending. You’ve probably already guessed that involves a lot more than clipping coupons and cutting your cable TV subscription. And in fact, it may require either cutting some very large expenses – like your housing and transportation – or reducing or eliminating dozens of smaller expenses.

There will be tough choices to be made. After all, cutting spending is something like going on a money diet. You’ll do well to think about your ultimate objective – early retirement – to help you embrace the short-term sacrifice.

Ultimately, retirement is about lowering your living expenses to a point where you can live comfortably without working. You may need to remind yourself of that on a regular basis.

Year 5 – 10: Assess and Plan Your Path to Retirement

At this point, you’re moving into the second half of your decade-long early retirement preparation. Generally speaking, you’ll want to concentrate mainly on staying the course. But at the same time, you’ll want to look for ways to increase savings, income and return on investment, and reduce spending.

You may not need to do anything dramatic in those areas at this point. But you should be alert to any ideas or strategies that can improve your performance in each. Small improvements in multiple strategies can dramatically speed your progress. That should be your goal at this point.

But perhaps most important will be guarding against complacency. By now, your overall financial situation will have already improved substantially. This is not the time to take a break. Keep pressing forward until you reach the point where you can finally retire.

Final Thoughts

Why am I stressing the importance of commitment to your early retirement goal? It’s easier than you think to get distracted, especially when you’re making a major change in your life. But while early retirement is certainly possible, it’s not easy. You’ll need to maintain laser beam focus to reach the goal in 10 years.

It will help you to realize the many options that will be open to you once your early retirement goal. Free from needing to make a living, you’ll have the choice to spend your time enjoying your life more, or pursuing opportunities that may even have the potential to make you wealthy.

It’s the kind of thing that happens once financial stress is gone from your life. But before you reach that point, you’ll need to be fully committed to getting there. 

The post Here’s Your Plan to Retire in Ten Years appeared first on Good Financial Cents®.



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MEFA Student Loans Review: Non-Profit Lender With Low Rates And Fees

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MEFA Student LoansMEFA Student Loans

When you need a private student loan for school, finding a student loan provider who can meet your needs and has reasonable loan terms is critical.

Private student loan providers are not all created equal. So researching providers is a must when it comes to finding a good deal. Looking for lenders that are non-profit organizations can be a good starting point as they may be willing to offer more attractive rates and/or terms.

MEFA is one such non-profit provider. For undergraduate and graduate students who are United States citizens and attend an eligible college, MEFA student loans could be a strong option. We’ll explain the loan features and when a private student loan from MEFA could make sense.

See how MEFA compares to other private lenders in minutes on Credible!


MEFA logoMEFA logoMEFA logo

Quick Summary

  • Undergraduate and graduate student loans
  • Reasonable rates and terms
  • No formal forbearance policy

MEFA Student Loans Details

Product Name

MEFA Student Loans

Min Loan Amount

$1,500

Max Loan Amount

Cost of Attendance

APR

3.75%-5.75%

Rate Type

Fixed

Loan Terms

10 or 15 Years

Promotions

None

Who Is MEFA?

MEFA is the Massachusetts Educational Financing Authority. They are a non-profit organization based in Boston, MA. MEFA provides student loans for undergraduate and graduate students alike. MEFA was created in 1982 by the Massachusetts state legislature at the request of colleges and universities across the state.

What Do They Offer?

MEFA offers private student loans to undergraduate and graduate students. They also provide student loan refinancing. While MEFA is a Massachusetts-based organization, they lend to families in all 50 states.

A MEFA loan only covers one school year. Students must apply each year that they will be in school. For example, if you want a loan to cover four years of school, you’ll need to apply four times for four loans.

Students can borrow up to the cost of attendance minus any financial aid. Minimum loan amounts are $2,000 for private schools and $1,500 for public schools. Cosigners are generally required for undergraduate loans.

Qualifications

Students must be enrolled at least half time in an accredited degree-granting undergraduate or graduate program and maintain satisfactory academic progress as outlined by the school. The school must be a non-profit but can be public or private. Loan applications are subject to MEFA credit approval standards.

To find out your actual loan rates, you’ll have to go through the full application process, which does require a hard credit check. If you are using a cosigner, they will also require a credit check and the final loan amount can depend on the cosigner’s finances. Upon approval, any loan rate that you might receive will fall within the ranges stated below for undergraduate and graduate loans.

Undergraduate Loans

There are several types of student loans for undergraduates to choose from. Fixed rates vary from 3.75% to 5.75% APR. Note: rates subject to change.

  • Immediate Repayment (10-year term): Payments begin immediately (28th day of the month following the final disbursement). 3.75% – 5.30% APR
  • Immediate Repayment (15-year term): Payments begin the same as above. 3.95% – 5.35% APR.
  • Interest-Only Repayment (15-year term): Interest-only payments begin immediately. Payments that include principal begin after the undergraduate anticipated in-school period. 4.25% – 5.40% APR.
  • Deferred Repayment (15-year term): Payments are deferred until six months after the student graduates or no longer meet academic qualifications. Deferments are available for a maximum of 60 months. 4.38% – 5.50% APR. 
  • Student Deferred Repayment with Co-Borrower Release (15-year term): Same terms as “Deferred Repayment.” However, the co-borrower can be released after 48 consecutive on-time payments. 4.62% – 5.75% APR.

Graduate Loans

There are two types of graduate student loans available from MEFA. Both have fixed rates. The same loan minimum and maximum amounts apply for graduate as undergraduate loans.

  • Interest-Only Repayment (15-year term): Payments begin the 28th day following the final loan disbursement. The principal will be added to loan payments once the in-school period ends. 4.25% – 5.40% APR.
  • Deferred Repayment (15-year term): Payments are deferred until six months after the student graduates or no longer meet academic qualifications. Unlike undergraduate loans, deferments on graduate loans max out at 36 months. 4.45% – 5.50% APR.

Are There Any Fees?

MEFA student loans (for both undergrads and graduates) come with no application or origination fees. They also don’t charge fees for late payments or returned checks. Finally, there are no prepayment penalties on MEFA student loans.

How Do I Open An Account?

To apply for a MEFA loan, visit https://www.mefa.org. Keep in mind that MEFA doesn’t offer pre-qualified rate quotes. If you submit a loan application, a hard credit inquiry will be placed on your credit report.

Is My Money Safe?

Since MEFA doesn’t take deposits, there isn’t any money to lose. If you’re approved for a MEFA student loan, the funds will be disbursed directly to your college or university.

Is It Worth It?

For students who need to take out private student loans to help pay for school, MEFA student loans could be worth it. They have competitive rates and terms and do offer some in-school deferment options.

However, one major downside to MEFA is that they don’t have any formal hardship forbearance policy. And since they use traditional loan underwriting methods, it’s likely that you’ll need a cosigner to get approved for a MEFA undergraduate student loan (and only one of their loans offers cosigner release).

Before you apply for any MEFA student loans, be sure to compare them with other private lenders on Credible. And if you’re looking to take out a private student loan without a cosigner, check out our guide.

MEFA Student Loans Features

Min Loan Amount

  • Public school: $1,500
  • Private school: $2,000

Max Loan Amount

Cost of attendance

APR

3.75%-5.75%

Auto-Pay Discount

None

Rate Type

Fixed

Loan Terms

10 or 15 years

Origination Fees

None

Prepayment Penalty?

No

In-School Payments

  • Immediate payments
  • Interest-only payments
  • Full deferment

Co-signers Allowed?

Yes, but only on one undergraduate plan

Grace Period

6 Months

Eligible Schools

Accredited non-profit degree-granting undergraduate or graduate program (public or private)

Servicer

American Education Services

Customer Service Phone Number

1-800-266-0243

Customer Service Hours

Monday-Friday, 8 am – 8pm

Customer Service Email

mefaloans@mefa.org

Address For Sending Payments

American Education Services
P.O. Box 65093
Baltimore, MD 21264-5093

Promotions

None

The post MEFA Student Loans Review: Non-Profit Lender With Low Rates And Fees appeared first on The College Investor.



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