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My Musings

How forgiveness plays a role in financial coaching

3/27/2020

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Forgiveness is needed in many areas of life. You may not think it has a place in financial coaching, but it does.

Money creates strong feelings, both good and bad. Just because you have a lot of money doesn’t mean you’re happy. And some people with just a little bit of money are the happiest.

Why are we talking about forgiveness in regards to money and financial coaching? For many, forgiveness needs to be part of the process so you can move forward with your financial plan.

Too often, we get caught up in the pain and history from the past that’s rooted in the origins of money. You may be angry about the debt you have or feel like you made the wrong choices when it comes to money.

Or, maybe you didn’t learn about money, finances, and how to use debt responsibly from your parents. Regardless of your reason for holding negative feelings about debt, you need to let it go.

It’s okay to have these feelings, but it’s best to acknowledge them and allow them to move on. You can do this by writing a letter forgiving the person you harbor your feelings to (your parents, yourself) and then burning it safely. This may mean you have to write several letters. 

Do this as often as you need to until you can finally feel the release of forgiveness. It will help you move past this time in your life and have clarity to move forward with your financial plan.

Today, you’re going to hear from Mandy about her feelings about debt and what she’s doing to overcome them.

Christine and I met on LinkedIn after I commented on one of her posts. When I saw she was a financial coach, I decided to reach out to her about the best way to get rid of my debt.

Like most people, I have student loan debt. Neither of my parents went to college, and I can remember from the time I was young being told I had to get good grades so I could go to college.

There was never a discussion on how I would pay for it, just that it had to go. From their perspective, you could only go so far in their generation without having a degree. So if I wanted to be better than them and have more options, it was the only route I could take.

So, I did what I was told. I went to school, got good grades, and then went to college. I was never counseled on student loans and what they really meant. Just that if I wanted to go and couldn’t pay for it, these were my options.

My parents weren’t in a position to pay and didn’t offer PLUS loans. So, I took out loans myself. The first year, I took out the full amount I was offered, even though I was still living at home and didn’t need to.

I did use some of the money for my following year. But then continued to take out loans, a little at a time, throughout school.

I also worked, so I paid some of the interest while in school, but not enough. I continued to take loans, just to cover class costs, and financed my books and other needs with my salary.

I took a break after receiving my Bachelor’s, paid on them for about a year, then went back for my MBA. You guessed it, took out more loans and only paid the interest on my deferred loans.

Here I sit, with 3 college degrees and a sizable amount of debt. I’ve been paying the standard 10-year repayment plan for about 3 years now. I reached out to Christine to find out what she thought my best option was to accelerate my payments.

After hearing my story, the first thing she said was, “I sense a lot of negative feelings about your student loan debt, tell me about that.” So I did, telling her what I wrote here.

She told me all the same things that are in this post. I need to forgive to be able to move on, and stop harboring my feelings at something that doesn’t really exist. 

At first, I didn’t really think much of it. But the more I thought about it, the more I realized she’s right. So I’m writing a letter to my parents and myself, so I can release my negative feelings and move on.

One thing I’ve learned after reading and hearing it over and over, forgiveness is not for the other person. It’s for yourself. Releasing the negativity, pain, and frustration will allow us to heal and move on.

This time, with a solid plan in place (thanks, Christine!) and a new way to look at my debt. Yes, it’s there, and will be for a few years. But, I got 3 college degrees, a ton of experience, and lots of other things out of those years. 

When I really think about it, that money means a lot of positive things to me: new ways of thinking, education (which I really value), moving forward, taking risks, and confidence in myself. 

And those things you really can’t put a price tag on. I guess in a way, I did. But choosing to think about the positive things going forward and leaving the negative in the past is the only way to move forward.

​
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Do you owe large amount of student loan debts?

3/17/2020

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I recently helped a client who’s a doctor cut down her student loan term in half.

She went from an interest rate of 6.75% thirty-year loan to a 3.10% fifteen-year loan and her monthly payment is less than what she was paying for as well.

Of course, the shorter the term, the lower the interest rate is as well.

If you owe large student loans, there are ways to pay them off faster.

Remember that an income-based repayment plan does not really benefit you in the long run because that interest is accruing.

If you’re paying less than even the interest a month, your balance will exponentially grow.

Unless you work for certain jobs that will qualify you for loan forgiveness
, you might be better off refinancing your student loans.

Also, loan forgiveness does not let you get away from paying taxes
. You might be forgiven for the loan but you most likely will have to pay taxes on the forgiven amount.

Imagine after 20 years, if your balance is $400K, how much tax do you think you’ll be paying for that? Be smart about your student loans.
 

Reach out to me for help.

Schedule a time for a complimentary chat.
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SHOULD I REFINANCE MY STUDENT LOANS?

10/31/2019

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The answer is NO if:

  • You qualify for loan forgiveness and plan to use it. Just know that forgiveness of the student loans does not mean forgiveness from the IRS. You still have to pay tax on forgiven loans unless you are a public service worker, federal government employee, teachers, and other qualified professionals. This is VERY important because I have too many clients who think that just because they’re on a qualified forgiveness loan that they don’t have to worry about taxes later. Well, surprise, that loan that might grow to become $200K later after 10 or 20 years is equivalent to you receiving an additional $200K of salary. You might have gotten away with not paying the loan but you still have to pay the taxes.
  • You don’t have a good credit score to refinance, so you might not get a better interest rate than what you already have now. This is another reason why having a great credit score is important.
  • You need an income-driven repayment (IBR) plan. If you don't know how your financial situation will be in the coming years. And you might not be able to afford to pay, having these plans make affording your monthly student loan payment easier on your budget every month. Just know, again, that unless you are working in a qualified field, your forgiven loans will be taxable. You can pay a small amount per month based on your income. But know that just making that bare minimum payment required based on your IBR plan will not make your loan go away. And if your loan is forgiven, you still have to pay taxes later unless you work in a qualifying field.

Consider refinancing IF:
​
  • You want to lower your interest rates. If you have a great credit score, you can get better interest rates than all your student loans combined. Just google student loan consolidation and get quotes, make sure you don't give your social security number away or run your credit.
  • You want to simplify your loans. It’s common to have several small loans. But this just makes it hard to track. Having one consolidated loan with a lower interest rate could help you better manage your budget.
  • You want to pay off your loans faster. That several small loans you have, how long do you think you can pay it off by itself if you don't strategize, consolidate and refinance it?
  • You have a good financial situation. Meaning you have a stable source of income and good credit.

If you need help with strategizing on ways to get out of your student loans faster. Schedule a complimentary chat to talk more about it.
​


About the author: Christine Teh is a personal finance money coach who helps people attain financial freedom and transform their relationship with money to create lasting changes. You can learn more about her by checking her website www.TehFinancialCoaching.com. She is currently accepting new clients. If you are interested in a chat, you can schedule a complimentary call.
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Should I save for my retirement or my kid's education?

4/14/2019

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In this video, I talked about which one to prioritize first. 
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Student Loans

3/11/2017

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Apologize I have not posted any blog since October. Life have been hectic and stressful for my partner and I with our new house. We finally close in on our brand new home in February, woohoo. It's definitely a dream come true to finally live in a place we can call our home with no fear of increasing rents. Mortgage are consistent or can only go down while rents go up (assuming you maintain your minimum or pay more to principal and you're not on variable rate). I might post a blog on house budgeting sometime later since there's a lot to talk about there as well but for today, I want to focus on student loans.

I never had to deal with student loans since I hate being in debt. The only debt I ever carried was a home mortgage and a car loan that I paid off as fast as I could. As I get more and more new clients, I see almost all of them have student loans (on top of other debts). It makes me sad that after getting a good education, most of them will almost always have a 6 figure student loan debt and their net worth will be negative for awhile till the debts are paid off. I also realize a lot of them don't understand their debts. The companies loaning them money do not really care about helping them get out of debt. They sometimes make things very complicated so you will stay in debt. Below are some things I've learned and advices I'd like to give to people who have student loans.

First, even if they say there's no minimum or it's deferred, you usually will have a minimum, please find out how much interest you accrue per month and at least pay that at a minimum otherwise your principal will keep growing with the added interest. Your student loan is just going to keep growing and growing and you might not be able to afford the monthly payment later. If it's deferred but interest is still accruing, you have to pay the interest at a minimum if your goal is to get out of debt.

Second, the only way to be able to pay down debt is to get to a positive cash flow per month. There is no way we can move on to your other financial goal if you don't get a handle on your day to day spending. Yes, I get it, we want to live a certain lifestyle but if you will stay in debt forever due to negative cash flow per month. How and when will you attain financial freedom? 

Lastly, I found two links that talks about student loans that I find interesting
     https://www.ted.com/talks/sajay_samuel_how_college_loans_exploit_students_for_profit
     http://www.daveramsey.com/blog/9-lies-college-student-loans

Remember, you don't have to be alone to tackle student debts or any other debts yourself. Please reach out to me (http://www.tehfinancialcoaching.com/contact.html) to set up a complimentary session and we can chat more about your financial situation and how I can help you. I am passionate about helping people navigate through their finances so they can live financially stress free. 

Christine


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  • Home
  • About Me
  • Work With Me
    • Financial Coaching
    • Budgeting Workshop
    • Tax Services
    • Business Coaching
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  • ONLINE COURSES
    • Budgeting Course
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