Cash Crunch in Your Forties: Your Children’s Future or Your Own?

by Stacy Francis, CFP®, CDFA

This dreadful dilemma was the main topic of discussion at a recent Savvy Ladies event. And the economy being what it is, alas, it is one to which far too many of us can relate. We all want what’s best for our children, so what could possibly be more important than securing them a top-notch education? On the other hand, past big 4-0, retirement is no longer a hazy, distant concept but something very real, approaching at rocket speed. So when faced with job loss and financial hardship, how do we prioritize?

The answer is quite simple: stick to your retirement savings plan, and direct whatever’s left toward the college savings account. It may sound selfish, but the truth is, no one’s going to give you a scholarship or a favorable retirement loan. And not only do your children have time on their side, greatly enhancing their chances to pay back whatever balances they may accrue, but the less savings you have set aside for them, the more financial aid becomes available to them. Once your financial situation starts to improve, you can certainly lend them a hand.

Ask any child what he or she would prefer – a bit of student loans or an aging parent crashing on the couch for, say, fifteen years. I’d say chances are high he or she will opt for the student debt.

So stick to your retirement savings plan. Then help your children.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.

How to Manage Student Loans

by Stacy Francis, CFP®, CDFA

A young woman at a recent Savvy Ladies seminar had just received her first student loan bill, and subsequently, her first panic attack. What was she supposed to do? There was no way she could spare that much money per month. Could she make smaller-than-minimum payments?

The answer is yes, she could. But for most people, it may not be the best idea. Here’s why.

Around graduation time, most students’ mailboxes are stuffed with offers from banks to refinance their debt and shrink their payments. So it is certainly possible. But the problem is, the longer you stay in debt, the more interest you are going to pay. And paying interest is basically throwing away money. While there are certainly worse kinds of debt than student debt, if you can stay on your regular payment schedule, it is generally wise to do so.

Another thing to note is that even if all your debt is with the same company, it is most likely split between a few different loans with different interest rates. If you do not stay on top of the company, they will apply your payments toward the lowest interest loans first – the exact opposite of what you want them to do. By making sure your money goes where you want it to go, you can save a ton of cash.

Of course, as I told the young woman in the seminar, there’s no reason you can’t pay off your loan earlier just because you have refinanced it. For her, refinancing now but striving to pay it off as soon as possible is probably the best option. What will work in your case will depend on your unique set of circumstances.

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Stacy Francis, CFP®, CDFA

Stacy Francis is the Founder, CEO and President of Francis Financial, Inc., a Wealth Management and Financial Planning firm. With over 18 years of experience in the financial industry, she is a CERTIFIED FINANCIAL PLANNER™ (CFP®), a Certified Divorce Financial Analyst™ (CDFA™), and a Certified Estate Planning Specialist (CES™). She is the Co-Director of the Association of Divorce Financial Planners’ (ADFP) Greater New York Metro Chapter and a member of the Women Presidents’ Organization (WPO) and an honoree member of the Private Risk Management Association (PRMA). A nationally recognized financial expert, Stacy has appeared on ABC News, CNBC, CNN, PBS Nightly Business Report, The Today Show, Good Morning America, Fine Living Network, and The O’Reilly Factor. Stacy attended the New York University Center for Finance, Law and Taxation.