JW’s Financial Coaching Podcast JW’s Financial Coaching Podcast-A show devoted to answering your personal financial questions and covering current events in personal finance. Giving people a new perspective on their money!

May 28, 2017  
00:0000:00
  • With college tuition prices skyrocketing, tuition reimbursement and student loan repayment programs are great ways to attract talent
  • What a tuition reimbursement can do for you
  • What a student loan repayment plan can do for you
  • Things to consider before doing either once
  • Quote of the lesson from Arthur Ashe

With the ongoing burden that student loan debt has become in our country employee tuition reimbursement and student loan repayment programs are a great way to either increase you education while paying nothing or a fraction of the cost, or reduce your current outstanding loan balance.

Today we continue our series we started last lesson looking at employee benefits that you are missing out on. While they might seem similar tuition reimbursement programs and student loan repayment programs are two different things.

Tuition Reimbursement

Tuition reimbursement programs work like this: you go to school to further your education and knowledge in a particular subject. After you prove that you passed the class, your employer will pay for some or all of the tuition.

This can be a great way to increase your value in the market place for a lot less than what it would cost you if you did it on your own. It also ties you closer to your employer as they are investing money in not only your future success but the company’s future success as well.

Before you consider going back to school because of tuition reimbursement consider the following things:

  • How much does the company cover?-Not all plans are 100% covered. Some are a lot less than that and others are tied to the grade that you get.
  • What will be the method you pay?-Your company will reimburse you once you can prove that you passed the course, but it is usually up to you to pay the institution upfront for the class. How will you come up with the money to pay? I would never recommend a student loan but what can you do to come up with the cash up front?
  • Is this something you want a degree in?-You can’t just get any old degree that you want. It has to be a degree that your company deems as beneficial to the role you are in. So if you aren’t really excited about what you are doing now, how is a degree or certification going to change that?
  • Is there are time period you have to work at the company after the reimbursement?-Your company is going to be investing a lot of money in your pursuit of this degree, and often there is a time period in which you need to stay with the company or you will have to pay back all or a portion of the tuition reimbursement. So do you like the company? Do you plan to be there regardless of whether you get a degree there or not?
  • If the tuition is not 100% covered, is this still a good deal for you?-Just because you are getting a tuition discount, it doesn’t necessarily mean it might still be a good deal for you. Again if you don’t want to stay with the company or are thinking about a career change to another field, spending the money and time to get the degree might not yield a proper payoff.

Student Loan Repayment

But what if you already went to school, and got your degree or not, and ended up with any kind of student loans? There are a small but growing number of firms that are offering that are trying to attract employees by offering to repay part of their student loans directly to the student loan servicer.

Now before you get too excited, realize that as of now the amount they are offering to pay is very small, often between $1,000 to $2,000 a year with a lifetime limit. So if you are drowning in student loan debt, working for one of these companies will not take you totally 100% off the hook.

But here are some other things to consider as well:

  • This is basically another form of compensation-This just takes the place of some other kind of benefit including momentary compensation, 401(K) contributions, health insurance premiums, etc. In fact any money that they put towards your student loans is actually considered taxable income for you. So if you get an offer of $40,000 with a student loan repayment of up to $2,000 a year, it is the exact equivalent of getting $42,000 from another offer. Except you are guarantee to use the $2,000 towards student loan repayment.
  • You still have to pay your minimum payment-The money they pay towards your student loan won’t get you out of making your monthly minimum payment. This is actually a good thing in that it will help to pay your loans off sooner, but it won’t free up any more money in your monthly budget, at least in the short term.
  • Lifetime limits-A lot, but not all companies that I researched who offer this benefit, have lifetime maximums on how much you can payoff through this program. Most were around a $10,000 maximum cap. But some companies had no cap, but only paid off about $1,000 max a year. Which means you really can’t count of this program to pay off a significant amount of student loan debt. Only you can do that.

I think that these are a great benefit for employers to offer to their employee’s, however I don’t feel that it is a long term plan to pay off your student loans as mentioned earlier. But I think it can be helpful and we’ll see this becoming more and more popular as many college graduates continue to graduate with large amounts of student loans.

Other resources mentioned in today’s lesson:

To send in your questions email me at Jon@JWFinancialCoaching.com

Today's quote of the lesson is brought to you by Jeff Goins book "Real Artists don't Starve

“When bright young Americans can't afford college, America pays the price” ~ Arthur Ashe

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, Google Play or by downloading the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.

May 21, 2017  
00:0000:00
  • New series on looking at your employee benefits
  • What is an Employee Stock Purchase Plan
  • How I use mine as a way to earn some quick cash
  • What to consider before you participate in your companies plan
  • Quote of the lesson from Warren Buffett

One of the most overlooked areas when it comes to our finances, is the area of benefits supplied by our employer. The reason is it is overlooked is because they are usually discussed very briefly on the first day you start the job, and all the information is in a packet that you just put in the corner of your desk . . . never to be seen of again.

But depending on your employer the benefits package can be a big boost to your overall finances. Some of the things that could potentially be included in your benefits package are:

  • Health Insurance
  • Life Insurance
  • Long Term and Short Term disability
  • Adoption assistance
  • Retirement funding
  • Employee discounts for services like phone, moving, car and hotel rentals

Today on the show we are going to start a new series on looking at some of those benefits and make you aware of other one’s that you may have overlooked.

This lesson we are breaking down Employee Stock Purchase Plans or ESPP.  I did a recap of my experience with ESPP’s back in 2011, but I thought today I would do an updated one and discuss the pro’s and con’s of each and if they are a good fit for you.

ESPP’s are company run programs that allow employee to purchase shares of that company at a discounted rate, usually anywhere between 5-15%. The employee contributes money through payroll deductions each pay period. After a specific period that money that you have been accumulating is taken and purchased shares of stock at a discounted rate.

They can be a benefit to you in either one of two ways. The first is through a long term investment tool and the second as a way to earn some quick cash, as long as there are no restrictions on when you can sell your stock.

What I currently do at my employer is I contribute $5,000 a quarter ($1,667 a month) into my ESPP. At the end of each quarter (4 times a year) that $5,000 is taken and used to purchase shares at a 10% discount. So for example is the stock closes at $20 at the end of the quarter the $5,000 will buy 277.78 shares of company stock ($20 x 90% prices equal $18 a share, $5,000 divided by $18). After it is posted to my account, I then turn around and sell the stock for a profit.

So for example I sell the 277.78 shares at $20 and have a gross of $5,555.56 (277.78 X $20). After you take out my basis of $5,000 you are left with a nice $555.56 profit. I then take that original $5,000 and put it back in my operating account, so in essence I’m really not contributing $20,000 of my pay into the stock, it is really $5,000 continually recycled.

So that’s how my companies program works, but what are the downsides. The first you need to know is what the period between when you can buy and when you can sell. For me it takes about 3 business days for the stock to be purchased to when it posts to my account and I can sell it. That is a small enough risk that there isn’t a lot of volatility. But I do know of some companies that require a holding period in terms of months of when you can sell. For me if that period is anything more than a week, I’m passing because I don’t want to take the risk.

Also the higher the percentage discount the better. Since my discount rate is 10% that is not as bad of return. But at 5% the return isn’t worth the risk in my opinion.

Before you consider whether or not this is right for you, take into account these considerations:

Investment Tool

I use my companies ESPP as a way to get quick cash, but theoretically I could use this as an investment tool. In that case I wouldn’t sell right away, I would just instead lower my contribution amount, I can’t afford to purchase $20,000 worth of stock a year, and just let the stock value appreciate.

But for me that is too much risk. I don’t like having investment in single stock as they are usually pretty volatile. But if you do go this route, I’d recommend it being no more than 10% of your total investment portfolio. Also depending when you sell you may be taxed on any gain so make sure you understand the tax consequences before you sell.

Be out of debt

You are contributing money up front in advance of the purchase, so if you are in debt I wouldn’t recommend doing this because the money could be better used towards paying off any debt you may have.

In addition you are also balancing money so I’d be out of debt and make sure I had a strong control of my finances before trying to juggle money around.

Have an emergency Fund

Like I mentioned earlier, you are contributing money upfront before you make a purchase and I don’t want my emergency fund hung up in the stock market. I want it where I can get it if a financial emergency actually occurs.

If you do participate in an ESPP, this should be taking a risk money, not emergency fund cash.

The key in all of this is to know the type of plan your companies ESPP is. Find out what the discount rate it, the amount of times a year you purchase stock, and how long before you can sell the stock without penalty are key things to determine before you do any work.

With that being said, I normally make an extra $2,000 a year in cash by doing this. Yes I have to sit aside $5,000 but the ~$2,000 a year gain equals out to be an approximate 40% return on that money. You really can’t beat that. But again it is because my companies ESPP works for my situation, we don’t have any debt, and we have a full emergency fund.

Other resources mentioned on the show:

To send in your questions email me at Jon@JWFinancialCoaching.com

Today's quote of the lesson is brought to you by Audible.com

“Don’t put all your eggs in one basket” ~ Warren Buffett

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, Google Play or by downloading the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.

May 15, 2017  
00:0000:00
  • In research for my upcoming book, been looking at statistics on credit card debt
  • Why credit card debt is not just an income or age issue
  • 3 ways to avoid credit card debt
  • Why I don't own a credit card
  • Quote of the lesson from Mark Cuban

In doing some research for my upcoming book, on how debt free people think, I’ve been doing a lot of research lately on debt statistics. Recently I did some research on credit card debt and the recent surveys and statistics coming out in regards to credit cards and their usage are quite startling.

  • Gallup found in 2014 that 71% of Americans own at least one credit card [1]
  • As of March 2016 38.1% of households that have a credit card have a balance at the end of each month with an average debt of $16,000 [2]
  • Among all US households the average credit card debt as of 2016 is $6,184.16 [3]
  • Among those who carry a credit card balance the average household will pay $1,292 in interest [4]
  • Total Outstanding US Credit Card is $762 billion[5]
  • Credit card ownership by Age:
    Age Range    Percent that own a credit card
    18-24               67%
    25-34               83%
    35-49               76%
    50+                  78%
  • 56% of Undergraduate students owned a credit card in 2016
  • Credit Card Debt by Age as of 2016
    Age Range    Average Credit Card Debt
    18-34               $5,808
    35-44               $8,235
    45-54               $9,096
    55-64               $8,158
    65+                  $6,351
  • Average Credit Card Debt by Income as of 2016
    Income Range           Average Credit Card Debt
    < $25,000                    $3,000
    $25,000 to $44,999    $3,900
    $45,000 to $69,999    $4,900
    $70,000 to $114,999  $5,800
    $115,000 to $159,999 $8,300
    $160,000+                   $11,200
  • Average annual credit card interest cost by household income in 2016
    Annual Income Range    Average annual interest paid
    Less than $21,432                   $677.43
    $21,432-$41,186                     $839.60
    $41,187-$68,212                     $1,135.91
    $68,213-$112,262                   $1,303.76
    $112,263-$157,479                 $1,882.85
    More than $157,490                $2,515.05
  • Annual credit interest paid by employment status in 2016
    Employment Status        Average annual interest paid
    Employee                                $1,210.58
    Self-employed                        $1,630.84
    Retired                                    $1,321.84
    Other, not working                  $1,554.57
  • Average Credit Card Debt by Gender
    Gender        Average Credit Card Debt
    Male            $7,407
    Female        $5,245

What does this information tells us? What I noticed was that credit card debt isn’t just a thing for those who don’t make a lot of money or are young. There are people in their 50’s and 60’s and those make well over six figures that have credit card debt.

The fact that we as a nation have $762 Billion in credit card debt is absurd. So today’s show I share ways to avoid credit card debt in the first place. On the surface they might seem basic, but a lot of times when it comes to personal finance, basic is usually the best answer.

  1. Don’t have a credit card in the first place.
  2. Do a monthly budget
  3. Have an Emergency Fund

We break down each of those ways further and share why whether or not you carry a balance on your credit card is not a good measure of whether it is wise for your to use one.

Other resources mentioned on today’s show

To send in your questions email me at Jon@JWFinancialCoaching.com

Today's quote of the lesson is brought to you by Audible.com

“Credit Cards are the WORST investment you can make” ~ Mark Cuban

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, Google Play or by downloading the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.

[1] http://www.gallup.com/poll/168668/americans-rely-less-credit-cards-previous-years.aspx

[2] https://www.valuepenguin.com/average-credit-card-debt

[3] https://www.nerdwallet.com/blog/average-credit-card-debt-household/

[4] https://www.nerdwallet.com/blog/average-credit-card-debt-household/

[5] https://www.valuepenguin.com/average-credit-card-debt

May 1, 2017  
00:0000:00
  • Three signs that you are worshiping at the altar of money
  • Why the worship of money is not a physical worship
  • How we can worship money no matter what our financial situation is
  • Money just makes us more of what we already are
  • Quote of the lesson from Andrew Carnegie

On today’s lesson we go into the topic of money worshiping. Now more than likely you aren’t sitting in your home each night and physically worshiping money. But there are thoughts and actions we do with money that lead to an unhealthy relationship with our money.

Now the thing with worshiping money is that this isn’t thing that only the wealthy of filthy rich can do. You can still worship money if you are struggling financially. Now worshiping money will look different to each person and there are many signs that you might be worshiping money. But below are three of the main reasons:

  1. You are afraid of losing money

No one I know enjoys losing money, so this should probably be better worded by saying you are obsessed with the possibility of losing money. We’re not talking about losing a $20 bill out of your pocket, but I’m talking about looking at your online ticker when the stock market drops or if certain geo-political events are occurring it keeps you up at night.

Also do you have a fear of living at a certain level or lifestyle? Are you saving or investing money to reach a certain goal? Or is it because you feel you will never have enough saved? If so it might be a sign you are putting too much trust in your money

  1. You are stingy with it

Take a look at your checkbook. Are you able to spend money and not worry about it? Can you enjoy the fruits of your labor? Now spending is all about ratios depending on a variety of factors including your goals, income, and debt load. But if you can’t enjoy spending *some* of your money on yourself there might be an issue.

 

Are you able to give money to charities and other noble causes? If you can’t and you have to see money leave your account that might be a sign you are worshiping money. Because if you’ll never have enough saved if you can’t enjoy spending and give some of it as well.

  1. You constantly think about it

What are you thinking about when you think about money? Do you think about having money so you can do all kinds of enjoyable things with it? Do you imagine what it would be like to have money? Do you dream of the power and “easiness” of life that you would have if you had more money? Do you think about money all the time?

I teach about money, but I don’t think about money all the time. Now granted there are some points in your life where you are thinking about money a lot more than others. But overall if money captures our thoughts, it might be a sign that you are worshiping money.

 

Now with that being said, I’m not saying that you shouldn’t be thinking about money at all. If you have a plan, you need to know where your money is going. Having a plan, budget, and goal with money is *NOT* worshiping money.

But if the thought of losing it, being stingy with it, or obsessively thinking about it is a constant in your life. You might have an issue of how much of an impact money has on your life. Granted money is nice, but it is not the be all, end all. It’s not a magic pill, and having more of it doesn’t guarantee anything in life. Money just make us more of what we already are already.

Other Resources mentioned in the show

To send in your questions email me at Jon@JWFinancialCoaching.com

Today's quote of the lesson is brought to you by Audible.com

“There is no idol more debasing than the worship of money” ~ Andrew Carnegie

Enjoyed this lesson? If so, please consider taking a few minutes to leave a review of the show either in Stitcher SmartRadio, or iTunes. For a step by step video of how that works, please watch this video on how to leave a review in iTunes.

You can subscribe to future podcasts through Stitcher SmartRadio or iTunes, Google Play or by downloading the iPhone app. Or you may listen to the podcast on the JW's Financial Coaching Facebook Fan page.