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Off To College This Fall? Here’s How To Reduce Student Loans

young man holding empty wallet and booksIf you’re off to college this fall, congratulations! You’re about to embark on what will likely be four of the best years of your life. You’ll learn new things and meet new people that could end up lifetime friends. There’ll be challenges – no question about that – long nights of studying and irascible teachers that must be pacified. However, if you do the work and keep your nose clean then four years from now you’ll have college behind you and will be ready to start your career or move on to grad school.

The most important question of all

You’ve probably already answered the most important question of all, which is how you’re going to pay for your education. If you’re typical you filled out the Free Application for Federal Student Aid (FAFSA) last January and you know whether you’ll be receiving any student aid or if you’ll be required to take out student loans to finance your education. If you were a really great student throughout high school or a gifted athlete you may have received a big scholarship, which is by far the best way to pay for a college education. For example, where we live there is a full-boat scholarship program available that will pay for the entire cost of all four years of college.

If you didn’t win a great scholarship you may have been awarded a work grant or a grant-in-aid. Both of these are good because, unlike student loans, the money doesn’t have to be repaid. These are usually subtracted from your tuition bills, making the cost of college more affordable.

If borrow you must

If the only way that you can finance your education is through student loans what you want to avoid is borrowing everything you’ll need to pay for your entire four years of college. Last year people graduated owing an average of more than $32,000 in student loan debts and many students were forced to borrow even more. If you start life after college owing $32,000 it could take you 10 years or more to pay off those loans. This is a burden that would not only affect you for those 10 years but possibly for the rest of your life.

Where it starts

The problem is that some college financial aid officers are not your friends. What they concentrate on is helping their schools. Some people call this the “used car salesman mentality.” These are financial aid officers who will create any kind of financial arrangements to ensure that you get into and stay in college. The problem is that this is a short-term situation but could end up hurting you over the long term.

The real cost

There is no question about the long-term impact of student loan debt. It’s not only crippling recent graduates it’s also lowering the growth of our economy. This is due to the fact that debt-laden students end up spending years after school struggling to repay their loans instead of buying a home or saving and investing. In addition, many people have become disenchanted by the whole idea of higher education. The question they are asking themselves, and that you might ask yourself, is it worth it. Should you really be running up $30,000, $40,000 or more in student loan debt to earn a degree that might not really help you get a job?

piggy bankKeep your loans to the very minimum

If you’re convinced that you do need a college degree for that “dream career,” the critical thing is to keep your student loans to the very minimum. This may come under the category of, well duh, but the less money you borrow the less you will have to repay.

Talk with your financial aid officer

Before you sign on the dotted line for a student loan be sure to discuss the alternatives with your financial aid officer. It’s possible that there is other forms of aid such as a work grant that could help you reduce the amount of money you will need to borrow. In addition, there might be scholarships available that you were never made aware of.

Get a job

Once you get settled into school you might get a part-time job. College towns almost always have openings in food service and retail. It could be tough to work, say, 20 hours a week while carrying a full course load but it is possible. If you get one of these jobs be sure to use the money to help pay for next semester’s costs. Jobs in food service and retail generally pay about $9 to $10 an hour, which might not seem like much. But if you were to work those 20 hours a week this would be around $150 after taxes or a total of roughly $2100 you would have available to apply toward next semester’s costs.

Graduate in four years

A second important thing you could do to keep those student loans to a minimum is graduate in four years or less. A mistake that many students make is changing majors in mid-stream, which almost inevitably leads to a fifth year of college. If you know what this year will cost you, try multiplying that number by five instead of four and you’ll see how much more debt you’ll end up with. The courses you take in your first year or two should help you decide on your major. But think this through very carefully before you declare because if you were to change your mind during or after your junior year you’ll end up piling on much more debt. You might also think about trying to graduate in less than four years. Of course, it would cost you more to take on maybe 18 credit hours for a couple of semesters instead of the standard 15. But if you got out of college just a semester early you’d more than make up the extra cost in what you would save in living expenses. Plus, this would give you an earlier start on getting a job vs. most of your colleagues.

Don’t switch schools

Do not switch schools unless it’s an absolute necessity. If you do this it will take you longer to graduate, which means you will graduate with more debt. One recent study showed that students that transferred to a new school ended up with about $3400 more debt than those that stayed put.

Finally, here’s a short video, courtesy of National Debt Relief, with good information about student loans and how to determine how much you may need to borrow.

How To Prevent Money From Destroying Your Marriage

Studio shot of a young couple fightingSome surveys have shown that the number two reason for marriage to break up is annoying habits. And the number one reason? It’s money issues. In fact, it easily beats out annoying habits. A study done by the Institute for Divorce Financial Analysis found that money problems were responsible for 22% of all divorces. This makes it the third leading cause of divorce. If you find that you and your significant other fight regularly over money this would certainly be an alarming statistic. However, money doesn’t have to lead to divorce. There are things you could do to keep your finances from destroying your relationship whether you’re about to say “I do” or thinking “I don’t want to do this anymore.”

Reveal your demons

Regardless of how uncomfortable it might feel you need to disclose your financial situation with your significant other before getting married. This means revealing any outstanding debts, income sources, loans, investments and any other financial obligations or assets. And of course if you are already married and withholding this kind of information, it’s time to practice full disclosure.

Don’t spend more on your marriage than you can afford

One of the biggest mistakes couples make is setting themselves up for disaster by spending too much on their weddings. Believe it or not, a wedding costs on the average more than $26,000 and if you live in a big metropolitan area it can be two or three times that much. Since the majority of couples just starting out can’t afford to pay cash for their weddings they put it on their credit cards. This means going into debt for a one-day celebration. This can put them in a situation where they’re drowning in debt when just starting out life together. If you’re short of cash you don’t need to forgo your wedding festivities but you should do something smaller or find ways to make the wedding more affordable. Then stage a really big party for your fifth or 10th anniversary when your finances sfould be much better.

Understand your spouse’s money mindset

The author, Matt Bell, who wrote the book Money and Marriage says that fights about money are often not really about money at all. They’re because of a difference in mindsets. For example, one of the two of you may feel their partner is spending too much but the issue may not be that they can’t afford it. It could be something deeper such as a real fear that they won’t be able to pay their bills in the future. Michelle Perry Higgins, who has written several books on finances, says it’s important to understand how your spouse feels about money and how they were raised around it. Were your partner’s parents frugal or big spenders? Was your spouse required to live on a budget? Was money talked about or was the subject taboo? Do you know your spouse’s biggest fear about your finances? The answers to these questions all play into a marriage and how each partner treats money. If you have a problem discussing these things with your spouse, you might take an online quiz together. One of the best of these is the quiz on Money Harmony. It’s free and will help you determine whether you’re a spender, hoarder, avoider, money monk or an amasser. A test like this can be a fun way to get started talking about money and can add some levity to what otherwise might be a very tense topic.

Make sure you have the same goals

As they say, life happens, times goes by and peoples’ financial priorities and expectations can change. Trouble happens when you and your significant other forget to check to make sure you’re working on the same goals. It’s a good idea to sit down once a year and talk about what it is you’re working towards. You might find that your goal is to buy a vacation home while your spouse’s is to pay off debt. It’s especially important to have the same goals if only one of you generates the income. What sometimes happens is that the non-working spouse feels guilty about not making any financial contributions or the working one is resentful because he or she feels their money isn’t being spent wisely. It can be helpful if the non-working partner finds a way to earn some income on the side even if it’s not much. This could be anything from having a garage sale to selling items on eBay or being an online juror. The amount of money doesn’t really matter. What matters is that when the non-working spouse starts to earn some money she or he will feel more powerful.

Use the awful “B word”

The cold, hard truth is that you need to have a household budget. It’s the only way to keep control of your money. While this can feel mind numbing there are significant benefits to having one. One of the most important of these is that it prevents the marital turbulence that can happen when one or both of you is in the dark about how your money is being spent. The only good news about the “B word” is that it’s now much easier thanks to technology. There are a huge number of online apps and tools that will track your spending for you. Mint is one of the most popular of these. It will track your spending, help you create a budget and keep track of your accounts and transactions so you can see exactly what you’re doing. It will also categorize your spending to give you a better idea of where your money is going. If you’re interested in learning more about Mint here’s a tutorial that will help you better understand how it works and what it could do for you,

There are many other great programs and websites designed to help you track and budget your spending so you might want to do a little research to find which one would be the best for you.

Don’t keep secrets

Possibly the fastest track to marital mayhem is when one spouse keeps secrets from the other. And despite what you might think this is not uncommon. About 7% of our country’s population or around 6 million consumers have financial accounts they’ve concealed from their spouses or significant others, which includes credit cards, checking accounts and savings accounts. And according to a poll done by CreditCards.com almost 20% of those surveyed have spent $500 or more without ever telling their partners. What often happens when one partner discovers that the other is hiding money or debt, war breaks out in the marriage. The website Moneysupermarket.com did a survey that found one in 10 people said their breakup or divorce was because of secret credit card purchases.

Smiling couple with laptopRemember the golden rule

It may seem obvious that you should treat your spouse as you would want him or her to treat you. Unfortunately, it’s something that a lot of couples don’t remember to do, especially the longer they’re married. For example, there is the issue of how to argue about money. It might be okay to complain about something that your partner or spouse is doing but it’s not acceptable to use words that are patronizing or contemptuous. You should also not use negative labels like “irresponsible” to describe the other person’s behavior. Always keep in mind the old saying that it’s okay to hate the play but not the player. No matter how serious the disagreement becomes, try your best to stay civil and courteous. This is a much faster track to reaching agreement then would be a screaming fit.

Smart Spending Tips: 5 Things We Spend Too Much Money On

hand taking money from walletGetting smart spending tips is always a good idea. Earning a high income will help you improve your personal finances but it will not eliminate the danger of you falling into debt. Even if you are earning a 6-figure income, you can still make financial mistakes as long as you are implementing bad spending habits. The truth is, you can earn $30,000 a year and still have more than enough to put aside for your saving goals. The technique is to make smart decisions about where you will spend your money.

Our society places a lot of importance to spending. That is thanks to consumerism. According to an article published on Reuters.com, an increase in the US consumer spending is an important evidence of economic growth. When people are spending their money, it means they are confident in parting with their cash. This confidence is borne out of a positive outlook in the economy and their belief that they can earn back that amount.

The article from Reuters indicated that in May of this year, spending was at its highest increase compared to the past 6 years. Most of the spending was done on big ticket items like automobiles. This bodes well for the economy as a whole but it can be dangerous for the average American household.

You need to remember that although you have more finances to spend, you still need to follow smart spending tips to keep your expenses from ruining your budget.

5 expenses that you do not have to spend much on

A study published on ConsumerReports.org revealed that 7 out of 10 Americans are now ready to make purchases – at least, the purchases that they put on hold. In fact, 60% of them have admitted to have begun the purchase. Those who are within the age bracket of 18 to 24 have revealed that they are ready to make large purchases like buying a home or a new car.

This is to be considered as good news because a confident buyer means they have more money to spend after their basic necessities. While that is true, it is important that you rein in on spending too much money of certain expenses. There are a couple of expenses that we think we have every right to splurge on. But if you consider your options carefully, you will realize that spending a lot on them is actually not encouraged.

So for some smart spending tips, here are 5 expenses that we usually spend a lot on unnecessarily.

Weddings

The truth is, any emotional spending is a recipe for disaster. This is why you need to be very careful when you are spending for your wedding. A lot of people think that this is a once in a lifetime experience or that there is really no price tag when it comes to love. But let us be reasonable. After all, you want to avoid being in debt just so you can get married right? That is just not the right way for you to start your marriage. Making your wedding special does not mean you need to spend a lot on it. Indulge in DIY projects that will help eliminate the need to buy things. Enlist the help of family and friends so they can contribute their skills. For instance, ask your talented friend if they can sing on your wedding day. That should eliminate the need to hire a professional. The same is true for your wedding host. Just ask you maid of honor to host the event. If your mom is an excellent baker, ask her to make your wedding cake. There are also many smart spending tips when it comes to buying your wedding dress, accessories, etc. Be creative and do not be ashamed to ask for help.

Funerals

This is another emotional expense that you need to be careful with. Sometimes, your grief would want you to spend a lot on the last needs of a loved one. While your grief is understandable, the amount of money that you will spend will not mean anything to the loved one that you lost. Be smart about your spending choices and be reminded that you can get different suppliers for the goods and services that you will need. That is part of the regulation that the Federal government is implementing on funeral service providers. It is always best to get a package long before there is a need for it. That way, you can concentrate on your grief and avoid making mistakes with your funeral expenses.

Food

A lot of people may dislike the idea of cutting back on their food costs. Well this is not to say that you need to be cheap when spending on food and groceries. However, you need to make sure that you will spend smartly on it. The best way to be smart with food expenses is to cook your meals from scratch. It is also the healthier alternative – at least if you do it right. In the end, eating healthy will give you double the savings because you can stay away from sickness too.

Clothes

Another expense that you need to implement smart spending tips is on clothing. We all need clothes. But you need to make sure that the money that you will spend on it will be reasonable. It is okay to buy branded clothes as long as you are getting the value for your money. Buy it if the quality of the clothing is at par with what you are spending – and not just to pay for the prestige of using designer labels. It is usually best to buy basic items that you can mix and match. Invest in accessories too. It can really liven up a basic outfit time and again.

Cars

Lastly, we have cars. One of the expenses that have risen over the years is the purchase of vehicles. The thing about buying cars is it will depreciate as soon as you drive off from the dealers. No matter how expensive or luxurious your car is, you need to remember that it will be valued less as soon as you start driving it. Be wise about how much you will spend on your car. You should not over spend on it but at the same time, you should avoid being too cheap. Sometimes, a cheap car will cost you a lot in terms of repairs and maintenance. Find the balance and go for the fuel efficient ones.

How to spend your money wisely

There is no doubt about it, we need to spend cash in order to get the things that we need in society. This is why you need to listen to smart spending tips. Here are three things that you can do in order to be a smart spender.

Build your lifestyle around your net income less savings

You may be advised to build your lifestyle according to how much you are earning. Believe it or not, that is not enough. You need to build your life around your net income less savings. That means you need to consider the income that you take home with you and remove the amount that you will save from that income. Only then should you consider the type of lifestyle that you can afford. According to an article published on CNBC.com, one third of households earning $75,000 or more are actually living from paycheck to paycheck. That is because they have built a lifestyle that is equal or probably more than what they are earning. You need to aim lower than what you can afford because you need to build up your savings for your future.

Create your budget

Another tip that you can do is to create a budget that you can follow. If an expense is not part of your budget, then think twice before you will spend on it. Make sure that you will create a budget plan that is realistic. That way, following it will not be too tough. If you restrict yourself too much, you might end up not following your budget plan. Remember that a budget plan is one of the most important smart spending tips that you need to implement in your life.

Borrow only when necessary

Lastly, you need to borrow money only when it is necessary. We are not saying that you eliminate debt completely from your life. You need to use credit so you can maintain a high credit score. But that does not mean you should keep on borrowing every chance you get. There are do’s and don’ts when you are borrowing money. Make sure you are aware of them and that you will follow them whenever possible. When you know how to use debt, it can actually help you improve your financial life.

7 Things To Ask Yourself Before Buying A House

couple discussing financesHome ownership has long been the American dream. Owning your home makes for a sense of security that just isn’t possible when you rent. As a renter you’re always at your landlord’s mercy. We know of one woman that rented a condo with a year-long lease, moved in, got settled and then five months later was told by her landlord that he was selling the unit and she would have to move. When you own your home there’s no landlord to please, no danger of getting kicked out and if you poke some holes in the wall to hang pictures, so what? It’s your wall.

You’ve saved money, you’re close to having enough for a down payment and feel you’re ready to take the plunge. As great as that might feel there are some things you need to ask yourself before you make that big purchase and here are seven of them.

How are my finances?

What this means is that you need to take a good look at your spending history. A first step towards this would be to pull your credit reports and check to make sure there are no ancient bills or erroneous items pulling down your score. You can get your credit reports from the three credit reporting bureaus – Experian, Equifax and TransUnion – or on the website www.annualcreditreport.com. If you don’t already have your credit score you need to also get it from a site like CreditKarma or CreditSesame or from one of the credit-reporting bureaus.

Second, go over your receipts from the past year and look for more egregious expenses such as eating out a lot or that week-long vacation in Cozumel that might make it difficult for you to save enough for a 20% down payment.

Third, take a really hard look at your credit card spending. If you find that it exceeds your earnings, you need to get it under control. Then don’t get any new credit for at least a year before you buy a home.

What’s my social life?

Do you enjoy spending your evenings at home watching a movie or entertaining? Do you like to cook for your friends or do you order takeout? Before you buy a house your social activities need to play a big role in the choice you make. If you like to have your friends together at home, put a bigger emphasis on the common areas and kitchen set up. On the other hand, if you spend a lot of time away from your house or apartment you might want to put less emphasis on your kitchen and look for a house with bigger bedrooms.

What’s happening with my career?

Before you buy a house it’s important to consider whether you feel settled in your career or what you’d really like to do is ditch your current job and sign up with the Culinary Institute of America. You may have budgeted for a mortgage that you can afford now but what would happen if your paycheck changes drastically in the next few years or disappears altogether? Of course, you can’t plan for everything that might happen in the future but especially if you check the box marked “Single” on your W-2 you need to think seriously about how stable is that paycheck.

Do I want to travel?

When you read about a guy who sold all of his earthly possessions so he could bike through Africa do you feel insanely jealous or just admire him? While your home won’t necessarily dictate your life for the next 18 or so years the job of selling one is just not as easy as breaking a lease. So, if you’re the type of person who would like to be able to get away occasionally for several months at a time, you might hold off on committing to a 30-year mortgage.

Am I a DIYer?Man decorating house

If you think that the cost of owning a home ends when you make your monthly payments, think again. It just costs a heck of a lot to maintain a house. In fact, one of the biggest sticker shocks that hits new homeowners is when they realize there’s no landlord or super to fix that leaking toilet, replace that broken hot water heater or patch your driveway. This means it’s important that you think about how much home maintenance work you can get free by doing it yourself. Can you repair a broken faucet? Swap out a ceiling fan? Rebuild a deck? There’s no shame in not being very handy when it comes to these types of things but if you plan on outsourcing them it’s important to take this into consideration when building your budget.

What’s my five-year plan?

Do you plan to have your significant other move in? Are kids in your future? Is your dream to foster rescue dogs? When you house shop it’s important to think about the life you want in the future as well as the one you now have. While it’s always possible to upgrade by moving to a home with a yard or a nursery don’t assume that it will be easy if your circumstances change. If 2007 taught us anything it’s that when the real estate market is dead or volatile selling your home and buying a new one can be tough.

Who are my friends?

Whether you’ve thought of it this way or not your friends play a big part in how you spend your money. Are you hanging with a crowd where you feel pressured to live beyond your means? Has Sunday brunch become a stressful weekly expense? Are you taking cabs home after a night of dining out because your friends insist? Do you dress to impress? We wouldn’t suggest you ditch your prosperous friends but if they’re keeping you from that dream purchase because you’re having a hard time saving that 20% down payment you’ll either need to learn to say, “no,” or get a new posse.

In summary

While the idea of owning your home can be incredibly appealing don’t rush into things until you’ve asked and answered these questions. If not, you could end up seeing that American dream turn into a living nightmare.

Financial Lessons For Kids That They Can Use As An Adult

group of kids around saving conceptDid you know that teaching financial lessons to your kids will help set them up to a financially successful life in the future? You need to consider how important it is to learn financial management at an early age. There are many benefits to knowing how to manage your money properly. For one, you can use financial management as a debt solution. It can also keep you from debt in the first place. This is one lesson that you want your child to have as they enter into adulthood. One bad financial decision, like student loans, may result in decades of suffering.

According to an article published on DailyFinance.com, it is revealed that the percentage of students who display responsible financial behaviour declined – at least when you look at the statistics from 2012 to 2014. These behaviours include tasks like reviewing bills, paying bills on time, following budgets, paying off credit cards and controlling their spending. The survey involved 42,000 first year college students from both four-year and two-year colleges and universities. The topics in the survey covered savings, banking, school loans and credit cards. The report is titled “Money Matters on Campus” – an initiative from Higher One and EverFi, a financial company and education technology company respectively.

The report indicated that college students are stressed financially – regardless of where they come from in life. According to the report, the thing that gives them the stress the most is their level of student loans.

It is very important that you equip your kids with the right lessons that they can use even as they get older. Truth is, this is not very hard to do. A lot of financial lessons that we got as kids can easily be applied even as we get older.

Money lessons we got as kids that can be applied when we’re older

According to Bankrate.com, there are a lot of parents who fail at teaching their kids the right financial lessons. In an article about teaching kids money lessons, it is revealed that 20% of parents have never talked to their kids about basic money concepts. This data came from a survey done by True Credit of TransUnion.

You need to do better than these parents so you can prepare your kids for a future filled with the right financial decisions. Here are 4 simple financial lessons that you can start with.

Money does not grow on trees.

Some parents think that this is a difficult concept for kids to grasp. But when you think about it, they need to learn it because it teaches them the value of money. They have to realize that you are working hard to earn the money that you are spending at home. You can discuss with them the concept of an income and how you need to spend hours in the office or your business to earn money. To illustrate this lesson, you can ask them to do extra difficult chores at home – something that they will be paid for. Choose these chores wisely. Try not to reward them for simple chores because that might make them refuse to help around the house if they will not be paid for it. If they are older, you can encourage them to find part time jobs – especially during the summer when school is over.

Just because you want it, doesn’t mean you should get it.

The next lesson that you can teach your kids is about smart spending. As a parent, it is quite difficult to say no to our children. But you know that it is never a good idea to give them everything they ask for. You need to help them get used to the idea that wanting something does not necessarily mean they should have it – especially if it is not a necessity. This lesson can serve as the foundation for smart spending habits. They can learn that even if they can afford to buy something in cash, it does not mean they should buy it.

Wait to save before you buy.

In connection with the precious lesson, you need to stress the importance of saving to your kids. Saving can help them purchase a lot of things in the future. If you have to say no to one of their requests, you can encourage them to save for it instead. If there is a toy that they want to buy, you can tell them that they can save up for it using their allowance. For younger kids, you can encourage them to help beyond their usual chores so they can earn extra money from you. They can use that to save up for the purchase that they want to make.

Spending money is fun.

While you need to encourage them to save, it is also important for you to teach your kids to enjoy spending the money that they have. This is especially true if they worked hard for that money. Have them commit to save a portion of it and then let them enjoy spending that money. They deserve whatever it is that they will spend it on. Try not to teach them to feel guilty if they do not save everything they earned. That is a mistake because they deserve to know that they can spend their money anyway they wish – as long as it is done in a smart way that will not jeopardize their financial standing.

Teaching kids smart money management skills is easy if you practice what you preach. Living by example is a lot better than hours of talking to your children about money management. Even if you spend hours teaching your kids, if they see that you are practicing something else, they are more inclined to follow what you are doing.

Money quotes from famous cartoons

If you feel like teaching your kids financial lessons seems daunting, you should know that there are a lot of tools that you can use to help you get the message across. For instance, Time for Kids and the financial editor of the “Today” show came up with a magazine that is intended to teach children money lessons. An article published on NYTimes.com explained that this magazine will target fourth, fifth and sixth graders. The publication will be distributed to schools nationwide.

There are also story books that you can use to teach your children about money. There are even cartoon shows that can teach financial lessons – if you know how to use them properly.

You should know that some famous cartoon characters have some pretty impressive quotes that you can use while teaching your kids money lessons. Here are some of them.

The past can hurt. But you can either run from it or learn from it. – Rafiki, The Lion King. This simply means it is okay to make mistakes when it comes to your money. As long as you know the lesson that you need to learn from it and you will avoid committing the same mistakes again.

Venture outside your comfort zone. The rewards are worth it. – Rapunzel, Tangled. This is a great quote that you can relate to investing. The simple rule in investing is this: the higher the risk, the higher potential there is to earn more.

The future is worth it. All the pain. All the tears. The future is worth the fight. – Martian Manhunter, DC Universe. The lesson you can connect here is about saving – specifically retirement savings. Although your kids will have to sacrifice and let go of some expenses, it will all be worth it if they end up saving a lot for their retirement.

You control your destiny – you don’t need magic to do it. And there are no magical shortcuts to solving your problems. – Merida, Brave. Merida here is telling us that when it comes to your financial problems, the shortcut is not the best way to solve them. For instance, when it comes to debt, bankruptcy may be the fastest way to solve it, but it is not always the best way for you to get out of debt. If a solution seems too easy and too good to be true, then it probably is.

Fairy tales can come true. You gotta make them happen, it all depends on you. – Tiana, Princess and the Frog. This means if you want to be rich, you need to work hard for it. Those get-rich-quick schemes are rarely true. You need to work hard to become rich. It all depends on how much you want to improve your finances – if you want it bad enough, you will do your best to reach your goal.

Do not be fooled by its commonplace appearance. Like so many things, it is not what’s outside, but what is inside that counts. – Aladdin, Aladdin. This young thief can be quoted when you are trying to teach your child about financial decisions. Just because a lot of people are doing something, buying a product or something similar, it does not mean they should follow suit. Teach your child to trust their judgement and stay true to what they want out of their finances.

There are other quotes that you can use to help teach your kids important financial lessons. You know your child best so you are in the best position to figure out the best way to teach them these important concepts.

7 Things Your Employer Won’t Tell You About Your 401(k) Plan

You have a job, you’re getting a steady paycheck and your company just gave you a form to sign up for something called a 401(k) plan. You give it a casual glance, see that you’d have to fund the account with money out of your paycheck, turn the form over and go on with your work.Video thumbnail for youtube video 6 Tips For Simplifying Your Financial Life

Bad mistake.

1. Sign up regardless

Some companies will match the money you put into your 401(k) account up to a certain percentage. Others won’t. If you work for a company that doesn’t provide matching dollars you should still sign up for a 401(k) account because it’s an almost painless way to get started on your retirement saving. And yes, the money will be taken out of your paycheck every pay period but you’re less likely to miss the money because you never actually see it. Even if you start out by saving just $15 or $25 out of every paycheck this will eventually add up to a fairly serious amount.

If your employer does match your contribution you absolutely must sign up for a 401(k)account or you’re basically throwing away free money. As an example of this let’s suppose you contribute $142 a month. If your employer matches to the maximum it will have added another $1704 by the end of a year.

2. Establish automatic increases

Experts at this sort of thing say that your 401(k) contribution plus whatever your company matches should add up to at least 15% of your annual income. If you don’t feel comfortable starting out at that level set up annual automatic increases. For example, you might increase your contribution by 1% a year. If you change your mind for some reason, you can always remove that automatic increase and there won’t be any penalty.

3. Take time to understand the alternatives

Most 401(k) plans limit your alternatives or how you can invest your money. For example, you might be limited to certain mutual funds, stocks and bonds. You may also be allowed to invest only a certain percentage of your contributions in stocks. Take some time to review your alternatives and to do some research. Make sure you understand the differences between stocks, mutual funds and bonds. Mutual funds can be a good choice because they spread the risk as you’re essentially investing in a number of companies. As a general these funds neither increase nor decrease in value as rapidly as do stocks. Bonds pay guaranteed annual dividends. This makes them a very stable investment. If you’ve ever heard the financial expression “coupon clippers” this refers to bonds because in some cases you literally clip a coupon each year and exchange it for cash.

4. Don’t be scared of stocks

You should put some of your money into stocks and some into mutual funds or bonds. If you’re in your 20s or early 30s you might want to heavy up on stocks. Yes, they will go up and down but you probably have close to 40 years before you retire and blue ribbon stocks always increase in value over the long term. Since you have a long-term before you retire don’t be afraid to take a risk at this time. But again do your homework. Choose stocks that are not likely to be terribly volatile. It might be okay to buy stock in some of the high-flying tech companies such as Google or Apple but you might want to balance that off by investing in companies like UPS, Honda and General Mills. These companies might not have the flashy track record of an Apple or a Facebook but they are good value stocks that are almost sure to steadily increase in value over the years to come.

5. Learn what it’s costing you

We don’t know of a single 401(k) plan where there is not an annual administrative fee charged. You should be able to see this on your account statement. However, there may also be fees based on the funds in which you invest. You probably won’t see this on your statement because it’s subtracted from your investment. You may have to call your plan administrator to learn what this fee or fees are. For example, you might find you’re being charged $3.17 for every $1000 you invest in a particular fund. That would be okay because it’s below the average 401(k) fund, which is $5.80 for every $1000 invested. If you find you’re paying more than the $5.80 you might want to take a hard look at the funds in which you’re investing.

6. Think before you leave

Most companies have what’s called a “vesting” date”. If you leave before this date you may lose your employer’s matching contribution. If you consider your current job to be just a steppingstone on your career path make sure to learn if there is a vesting date and when it is before you decide to leave. While this might not keep you cemented to your job it’s something valuable to know. After all, you might learn that if you were to stay just another month you’d get the full amount of your employer’s matching contribution.

7. You can take it with youstack of cash

There’s the old saying about money that “you can’t take it with you” when you die. However, in the case of a 401(k) you can take the money with you. However, don’t use it for a great island vacation or a new car. If you spend it before age 59 1/2 you will pay a tax penalty of 10%, plus you’ll have to pay regular income tax on the full amount. If your new employer offers a 401(k) plan your best option would be to roll over the money into it. If not, put it in an IRA. Alternately, you could leave the money where it is with your current employer where it will continue to grow although you can’t, of course, add any more money to it. Just make sure you keep some kind of a reminder so that 10 years from now you won’t have completely forgotten about that money. And yes, many people actually do this.

If you’d like to know more about 401(k) plans here’s a video courtesy of National Debt Relief with details about them and how employer matching works …

Tips For Everyone That Wants To Get Their Personal Finances Under Control

couple discussing finances

Couple calculating their budget

Are you tired of struggling to make ends meet? Do you constantly worry about running out of money before your next paycheck? Do you find yourself juggling bills to make sure that you at least get the important ones paid?

You don’t have to live like this.

There are simple things you could do to get your personal finances under control. Where it begins is understanding how much you spend versus how much you earn. If you’re having problems financially the root cause is because you’re spending more than you earn. So, the first thing you need to do is change your spending habits so that you are earning more than you spend. This may seem obvious but it’s the foundation of smart money management.

Make a budget

Step two on your road to getting your personal finances under control is to create a budget so that you can build your savings. A study by Bankrate.com recently revealed that more than 60% of us don’t even have a couple of hundred bucks in an emergency fund. If this is true of you, you need to do better. The way you do it is by creating a monthly budget where you build up savings. Ideally you should have the equivalent of six months of your living expenses in savings. If this doesn’t feel realistic at least try for three months’ worth.

Create a plan

If you’re typical your most troublesome debts are probably unsecured ones such as credit card debts. If so, you need to make a plan to get them under control. One of the most popular ways to do this is by “snowballing” those debts. This is a strategy developed by Dave Ramsey and it’s worked for thousands of people. Just make a list of your debts ranging from the one with the lowest balance down the one with the largest. Then focus all of your efforts on paying off the debt with the lowest balance – while continuing to make at least the minimum payments on your other debts. You should be able to get that first debt paid off fairly quickly, which will free up money you can use to pay off the debt with the second smallest balance and so on.

hand with cashUse cash

You don’t need to close your credit card accounts but you should stick your credit cards away in a drawer somewhere and use cash for your everyday expenses. Now that you have a budget you should have a handle on your everyday spending. Calculate the amount you spend each month, divide it in half and then take that amount in cash when you are next paid. The odds are overwhelming that you’ll end up spending less because psychologically it’s just a lot harder to take out the cash to pay for something than to swipe a credit card. If there is some reason why you can’t use cash for your everyday expenses then at least use a debit card rather than a credit card. While it’s easier to swipe a debit card then to pay cash for something it will at least keep your spending in check because when you zero out your checking account that’s it. You just can’t spend anymore without going into overdraft, which is also a bad thing.

Work on your credit score

Having a low credit score will cost you money in the form of increased interest rates and higher insurance premiums. If you don’t know your credit score you need to learn what it is. You can get it free from any of the three credit reporting bureaus – Experian, TransUnion or Equifax – or from a site such as CreditKarma. You’ll probably find you have a low credit score of 600 or less. If this is the case you need to get to work improving it. Your credit score is made up of five components. The biggest, which accounts for 35% of your score, is your credit history and you can’t do anything about it. However, the second largest factor – credit utilization –, which accounts for 30% of your score – is something you could work on. The way it’s calculated is by dividing the amount of credit you’ve used by the total amount of credit you have available. For example, if you have total credit limits of $10,000 and have used up $5000 of it your credit utilization would be 50%, which is way too high. Do the math to see what’s your credit utilization ratio. If it’s higher than 30% this is something you could affect by paying down some of your debts or by getting an increase in your credit limits although this is much easier said than done.

Review your credit reports for errors

You can get your credit reports free once a year from the three credit bureaus or on the site www.annualcreditreport.com. Review your reports very carefully as they could contain errors that are dragging down your credit score. A study done last year by the Consumer Financial Protection Bureau found that at least 5% of us have errors in our credit reports that are dragging down our credit scores. And who knows? You might be one of that 5%. If you do find errors it’s important to dispute them by writing a letter to the appropriate credit bureau. If you have documentation supporting your claim the credit bureau must by law contact the institution that provided the information and ask that it be verified. If it can’t verify the information or if it fails to respond within 30 days the credit bureau is required to remove the item from your credit report – which could cause it to take a healthy bump up.

Find the negative items

The other thing to look for on your credit reports are negative items such as late payments, charge-offs and accounts that have gone to collection. Then do what you can about them. If you have late payments try to catch them up. Charged off accounts may have been charged off but you still owe the balances. If you pay them off it will improve your credit score. The same is true of accounts that have gone to collection. You will need to contact the debt collection agency to see what you can do to get the balance paid off or to negotiate a settlement.

Get some counseling

If all of this seems a bit overwhelming you might try consumer credit counseling. You should be able to find a credit counseling agency where you live or, failing that, on the Internet. In either case you’ll have a counselor who will review your finances and help you create a budget and a Debt Management Plan (DMP). Your counselor will present this plan to your creditors. If they accept the plan you won’t be required to pay them. Instead, you will send a check each month to the credit-counseling agency. You will have to give up any credit cards that are in your DMP and not take on any new debt until you complete your plan, which typically takes five years. However, at the end of those five years you would be debt-free and should have learned to be a very smart money manager.

If you’re unfamiliar with consumer credit counseling here’s a short video, courtesy of National Debt Relief, that explains what it is and how it works.

5 Times When It’s Okay To Borrow Money

If you’ve spent more than 10 minutes reading about personal finance you know it’s a really bad idea to borrow money. Almost the first thing every book on personal finance preaches is “don’t borrow money”, “don’t get in debt,” “shun debt like the plague“ etc. and etc. And in most cases this is good advice. When you borrow money you’re really borrowing from a future you. You get to use the money now but it won’t seem like such a good idea several years from now when you’re still trying to repay it. Debt is basically a financial parasite that sucks money out of your future earnings leaving you with less to save or spend.

couple discussing finances

Couple calculating their budget

But the fact is that there are times when it’s okay to borrow money. Of course, you should have a plan for repaying it.

#1. When you can’t pay big medical bills

No matter how diligently you plan your finances a medical emergency can cause them to spiral out of control. The three credit bureaus recently changed the way they handle medical bills, as they now will give you up to 180 days to address them before they add them to your credit reports. If you simply can’t pay those medical bills and can’t work out some kind of a repayment plan with your healthcare provider then the 180 days would at least give you enough time to get a personal loan and pay them off. Of course, you would want to try to find a loan that has a low interest rate. Borrowing money might not be an optimal solution to those medical bills but it would be much better than seeing them go on your credit reports as unpaid. You’ll want to make the payments on that personal loan on time and in full because if you don’t your credit score will be seriously damaged.

#2. When you can’t afford your moving costs

Moving can be one of the most stressful events in your life. This is especially true when you consider the expenses associated with a move. In addition to paying a mover there will be issues having to do with boxes, storage, transportation and those little unexpected costs that always pop up. If you’re making an intrastate move and you total all the costs associated with it you can easily end up spending $1000 to $1100. And if you’re moving interstate the cost might be as high as $5000. If you take out a personal loan to cover your moving costs it will save you money versus putting them on a credit card. The reason for this is because a personal loan will have a much lower interest cost than your credit cards. Get out your most recent credit card statement, check the interest rate and you may find that it’s 15% or even higher. In comparison, you should be able to get a small personal loan that has a lower interest rate and simple interest – so that the interest is calculated only on the principal amount.

#3. When you’re saving money but carrying debt

If you’re carrying debt but trying to save money at the same time it’s a losing proposition. One website recently published a list of the 10 best savings accounts for 2015 and the best one offered an APR of 1.10%. Now compare that with what you’re paying on your credit card debts, which probably averages 15% or more. This suggests that a better solution would be to take out a personal loan and use the money to pay off those credit card debts. Then, at least for the time being, you should quit worrying about saving money and focus instead on paying off that personal loan. Get it paid off in a year or 18 months and you would then have a lot more money to stick away in a savings account or to invest.

smartphone anxiety#4. When you can’t pay a car repair bill

It’s tough to earn a living if you don’t have access to an automobile that you can rely on. If you‘ve had a car accident that wasn’t covered by your insurance or a major repair bill that you didn’t expect your access to reliable transportation could be seriously affected. If you’re your unable to work out an affordable repayment plan with the car repair shop then a better option could be to take out a personal loan to pay for the work. Again, this could be a much better option than putting the repair bill on a credit card because that loan should have a lower interest rate than your credit card. In addition, when you charge things on a credit card and can’t pay off the balance at the end of the month, you become the victim of compounding interest. This is where the credit card companies make the real money because you’re paying interest on interest. In comparison, most personal loans are based on simple interest, which is a much better deal.

#5. When you want to make home improvements but don’t have enough equity

How much equity do you have in your home? If you’re not familiar with equity it’s the difference between what your home is worth and what you owe on your mortgage. As an example of this, if your house were worth $100,000 but you owed only $80,000 on your mortgage, you would have $20,000 in equity. If this were the case you could take out a home equity loan or homeowner equity line of credit to finance the home improvements you would like to make. For example, you might want to update your kitchen, add outdoor features or replace your roof. Taking out a personal loan to finance these additions or renovations could be a good idea because they should add value to your home.

If you must use a credit care

If you find it necessary to put medical bills, an interstate move or a car repair bill on a credit card the critical thing is to not make just the minimum payment as this is where compounding interest will cost you big money … as explained in this video.

A tool for managing your finances

A personal loan when used for the right reasons that has a low interest rate and fair terms can actually be a great tool that can help you manage your personal finances. However, it’s important to think things through carefully and maybe even sit down with a lender to discus your options before taking out a personal loan. And it’s critical that you get a loan with payments you can afford and then make those payments on time every time.

Survey Says: Almost Half Of Workers Do Not Have Enough Emergency Funds

piggy bankWhen it comes to saving money, financial experts have always encouraged consumers to think about their emergency funds. This is the amount of money that you will put aside so you have the funds to get you out of unexpected expenses in the future. The use for this money can range between the trivial (e.g. busted transmission in your car) to the serious (e.g. medical illness) expenses.

The irony about living is you will never know what will happen in the future. No matter how careful you are, something is always bound to happen that will get you off track. Even the most careful individual could suddenly end up with an illness or without a job. It is better to be prepared for these events. Apart from being physically, mentally, and emotionally strong, you also have to be ready financially. And the only way you can do the latter is by building up emergency funds.

According the pulse survey results from Bankrate.com, 28% of their respondents will resort to credit in order to pay for unexpected expenses amounting to $500 to $1,000. 16% of the respondents said that they will borrow money from family and friends. This is a great option because these people usually do not have to worry about high interest rates. The same survey also revealed that 12% of their respondents would use credit cards to finance an unexpected expense. This is a dangerous habit because of the high interest rates that oftentimes accompany credit card debt.

If you want to be prepared for emergency expenses, it is important that you save up for it. You do not want to be caught unprepared at the wrong time.

Survey says Americans are not prepared for unexpected expenses

In a separate survey published on Principal.com, it is revealed that almost half of their respondents will find it difficult to find financial resources for an unexpected expense that amounts to $1,000. The survey was initiated by the Principal Financial Group and conducted by Harris Poll among 1,111 employees. These workers come from small to mid-sized businesses. The survey was done to gauge the financial well-being of workers.

The results of the survey revealed that 17% said that it is difficult to produce this amount, 13% said it is very difficult and 17% said it is extremely difficult. That means 47% of the respondents in this survey said that they will have a difficult time getting the resources for an emergency that will cost them $1,000. Imagine if they were faced with a bigger expense – that could very well lead them to a financial crisis.

To prevent this from happening, you need to build up emergency funds that will give you the resources to pay off unexpected financial needs. There are four important reasons why you need this savings.

Emergency funds can help you avoid a crisis.

If you have the financial resources to spend on an unexpected expense, you may very well be able to avoid going into a financial crisis. Instead of letting a situation get out of hand, you can immediately use the funds that you have to quickly solve a problem. Of course, you can only do this if the cause of the crisis is something that you can control. For instance, if you get sick, you will not hesitate to get treated because you know that you have the funds to spend for it. That can keep you from developing a more serious illness.

Emergency funds can help you survive a crisis.

In case you are faced with a financial crisis that you have no control over, your emergency funds will help you survive a financial crisis. An example of this is a job loss because of an economic situation.  Your emergency fund will give you the resources you will need in order to get through the tough situation that you are currently in.

Emergency funds can keep you from debts.

Another reason why you need to save for an emergency fund is to keep yourself from debts. Going back to the Bankrate survey, people who do not have savings usually resort to credit. It is okay if you can borrow money without interest. But what if you have no choice but to loan an amount with a high interest rate? You will be wasting a lot of money paying for that interest amount. You can avoid debt if you have the amount to spend from your savings in the first place.

Emergency funds can give you peace of mind.

Lastly, you need to build up your emergency funds because it will help you life a life that is free from stress. At the very least, you know that your financial situation is one thing that you do not have to worry about – regardless of what the future may bring. This is probably the most important thing that an emergency fund can give you. Even if you are already immersed in problems, you do not have to panic because you have the resources to spend in the meantime. You can concentrate on solving your problems while you continue to have the finances to spend on your needs.

Tips to build your reserve fund fast

According to an article published on NYTimes.com, more than 5 out of 10 American households have less than one month’s worth of income in their savings account. That means if something happens to their job, they can only survive for barely a month before their finances expire. You do not want this to happen so you must be prepared to build your emergency fund fast. The article mentioned that it is possible to build up your savings even if you have a limited income. The thing that you need to overcome is sometimes, psychological. People think that saving up for 6 month’s worth of income is impossible and they give up on the task even before they have started.

You need to overcome this negativity and concentrate on the target amount that you need to reach. There are rules that you need to follow when building your emergency fund and here are some of them.

  • Compute how much you need for emergency and reserve funds. Calculate the amount that you need to save for your emergency funds and your reserve funds. The emergency fund is the savings that will be spent for very serious expenses like job loss, etc. The reserve fund is for the more trivial expenses that you did not plan for. For instance, the gift that you need to buy for the wedding of your cousin, etc.
  • Review your budget plan. It is also important to review your budget plan so you can include the amount that you need to put aside for your savings. It is best to treat your savings like a bill so that you will put money into it no matter what.
  • Downsize your lifestyle. To increase the amount in your emergency funds, you may want to downsize your lifestyle so that you can lower your expenses. At least, this is true if you really want to grow your savings quickly. The more you can sacrifice from your usual expenses, the more you can put aside in your savings.
  • Increase your income. While you are saving on your expenses, you may want to boost that by increasing your income too. Try to earn more by setting up a passive income. You can also sell off some of the things that you no longer need so the profits can be added to your emergency fund.

Want To Increase Your Savings? Live On One Income

couple discussing finances

Couple calculating their budget

You would think that in order to increase your savings, you need to have at least 2 earning individuals at home. In fact, in most households, both couples are forced to have a job so they can make ends meet. Having both husband and wife earning may seem like the family will be better off financially. But did you know that it is possible to grow your savings even if only one person is earning an income?

Unless you are both career-driven, you probably have thought about quitting and staying at home to take care of the fort. If you feel like you are not getting paid what you are worth anyway, this may be a great option for you. A young couple who want to start a family would be talking about this too. Someone needs to stay at home to take care of the kids – especially while they are young. This would be a very good reason to live on one income.

But if you have dreams of buying something big in the future, you know that you need to increase your savings. And if you want to maximize what you can save, you know that the most logical thing to do is to have both you and your partner or spouse working.

According to a the daily consumer spending found at Gallup.com, Americans spend an average of $90 each day. That makes $2,700 a month. That amount does not include any payments made towards the house like mortgages, and household bills. Any expense on cars or vehicles are also not included here. So you can see that this amount is actually higher. That means the average household needs to spend at least $3,000 to $3,500 each month.

Do you think your home can afford to meet this expense with just one person earning a living? And what if you want to increase your savings? Would it be possible with this spending statistic and one income?

It will honestly not be a walk in the park but it is very much possible.

Saving benefits of having one stay-at-home parent

Believe it or not, there are saving benefits if you have a stay-at-home parent in your household. Do not frown upon those who decided to quit their job to take care of their career. They may be saving more money by staying at home instead of working for someone else. If you have the right situation, it may be more feasible to just quit your job.

There was an article that went viral a few months ago that indicated how much a stay at home mom is really worth. This was an article written by a husband with a stay-at-home wife. This article published on WeAreGlory.com gave specific figures that will give you an idea about how much a stay-at-home parent would be earning if we paid them for the work they do at home. Let us enumerate what was indicated in the article.

  • Child caring services. The author started by stating how his wife cares for their son every day. Changing diapers, feeding, playing, comforting, putting to sleep – all of these are tasks that his wife does day in and day out. If you hire a full time nanny to care for your child that way, you have to spend $705 a week or $2,820 a month. In essence, your wife (or husband), would be worth more because they care for your child 24/7.
  • Cleaning services. The one staying at home is usually the one cleaning the house too. This costs $50-$100 per visit – depending on the size of the house and how thorough you want the cleaning to go. If you have pets too – that will cost more. This is easily $100 a week – or $400 a month.
  • Personal shopper. Whenever your wife goes out to run errands like doing the groceries, buying gifts for family and friends, and going to the dry cleaners, that is a career too. The people who do this professionally are called personal shoppers. And they can cost you around $65 hour, for 4 hours a week, that is $260 a week or $1,040 a month.
  • Personal chef. Now this can be costly. A chef preparing 5 meals with 2 servings each can cost $400 or more. To be conservative, the author of the article gave an amount to $240 a week. That is $960 a month.
  • Financial assistant. Most of the time, the one staying at home is the one handling the finances because they know how much money is needed to keep the house stocked and in order. Whoever stays at home will most likely do the budgeting, paying of bills, etc. That sound like the work of a financial assistant who earns around $15 an hour. Assuming this will take around 5 hours a week to organize financial matters at home, that means $300 each month – at the very least.
  • Washer/Dryer personnel. Doing the laundry costs $25 a week. This will means it will cost you $100 a month to have all the dirty laundry in the house taken cared of.

We could go on and on because there are other things that a stay-at-home parent does around the house. But if we stop here, we are looking at a monthly salary of $5,620 or $67,440 a year. If you think about it, that is the amount that you are saving if one of you stays at home. Who would have thought that living on one income is actually a great saving tip?

If one of you earns less than this amount, then quitting your job could make sense. You would be able to increase your savings for future purchases.

How to transition into a one income household

According to the PewSocialTrends.org, there are more stay at home moms in 2012. In 1999, 23% of moms do not work outside. In 2012, that percentage went up to 29%. A lot of those who chose to stay at home are married and thus have husbands who are financially supporting them. These are the women who have consciously decided to stop working to care for their kids. Most of the single or unmarried mothers who are staying at home have done so because they could not find a job – and not because they decided to.

Of course, you have to deal with having a low monthly budget when only one of you is earning at home. While it may seem like a difficult task, it is possible to be happy while in a low income household. You just have to know how to transition to it properly.

  • Visualize how your budget will be like with one income. Before you go ahead and quit your job, create a budget and see how the household will fare with only one income. That way, you can discuss with your spouse if it is feasible or not. Here is a video that you can watch for some tips when creating a budget for a one income household.

  • Make sure you have an emergency fund. Increase your savings first before you quit your job. That way, any unexpected expense will not cripple your budget immediately.
  • Identify the expenses that you can get rid of. Definitely, you need to lower your expenses so you can increase your savings despite a lower monthly cash flow. Try not to sacrifice your savings. You need to have savings so try to sacrifice your expenses instead of your emergency fund. If you have to downsize your lifestyle, that could be arranged. Selling some of your stuff could help increase your emergency fund.
  • Have a plan for your debt. In case you have debts, you need to get rid of them before you live on one income. When you get rid of debt, it is one way to increase your savings too. You are wasting money on the interest amount that you pay towards your debts. Eliminate that and living on one income will be easier.
  • Try to find part-time work that you can do at home. Of course, staying at home does not really mean no income can be generated. There are so many work from home careers out there. You may be able to generate some income by becoming an online freelancer.

With some great financial management skills, it is possible to increase your savings even if you are living on one income in your household. Once you get the trick of budgeting and smart spending, it should all come easily. Not only will you be financially smarter, you have a better chance at creating a high quality home for you and your kids.

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