One Bite at a Time

The halls are eerily quiet.  Nearly everyone is wearing exercise clothing.  Coffee is being taken in intravenously.  The law school reeks of exam time.

Take a deep breath.  Have the extra piece of chocolate.  Stop by the shelter and pet some dogs and cats.  It’s ok to eat pizza for breakfast and potato chips for dinner.  This too shall pass.

As the old saying goes, “How do you eat an elephant?  One bite at a time.”  And while I don’t condone the consumption of pachyderms, I love the sentiment.  If it seems impossible, break it down into smaller, more manageable pieces.

Hang in there.  You’ve got this.  One bite at a time.

Sometimes You Need to Reboot

Sometimes you just need to reboot.  We’ve all had it happen with our phones and computers.  The system just gets so overwhelmed that the only way to fix it is to turn it off and turn it back on again, giving it a fresh, clean start.

I was away from the office last Friday because I needed to reboot myself.  Spring is a pretty overwhelming time of year in the Financial Aid Office, and my work and personal worlds both had me feeling a bit out of control.  So I took a long weekend to go to a small music festival (one of my favorite things to do) and disconnect from normal life.  Today I’m back in the office with the same mounds of undone work surrounding me…but I feel better than I did last week.  Because I’ve had a reboot.

Sometimes your finances will feel overwhelming and you won’t be sure how you’ll ever be able to dig out.  At those times you may need to reboot your financial plans.  Maybe you have a credit card balance that you could save money on by transferring to a different card.  Maybe your student loan payment is uncomfortably high, but you can make life more manageable with a different payment plan.  Maybe your housing cost is too high and you have to make the difficult choice to move to a less expensive situation.  If your money has you feeling like you are sinking rather than swimming, you may need to look at things from a different angle and reboot your plan.  You will experience this many times throughout your life.  But nothing is hopeless.  You just need to reboot.

Secure Your Own Mask First

When you fly on an airplane there is always a safety speech before takeoff.  And the thing that has been ringing in my head since my last flight is, “Please secure your own mask before assisting others.”

That one sentence pretty much sums up this semester for me.  Spring semester always seems a bit harried, and this semester is no exception.  I’m not getting things done in as timely a fashion as I would like.  I’m a little overextended and feel like I’m focused a lot more on caring for others than making sure I’m ok myself.  But a conversation with a student last week made me revisit a tip on this theme that I wrote a couple of years ago.  I need to stop and secure my own mask before I can assist others.  You simply can’t effectively help others if you are in risk of not keeping yourself going.

The “secure your own mask” bit also hits close to home in a different way when it comes to charitable giving.  I’m sure I’m not the only person who hears the phone ring, sees the number of their alma mater, and lets it go to voice mail.  I know they are looking for a donation.  Sometimes it seems like every charity I’ve ever donated to is reaching out for a contribution at the same time.  And I want to assist others.  But my husband and I have some medical issues that are challenging financially.  So rather than stretching myself to assist others as much as I would like, I smile, politely said no (or agree to only a tiny amount) and proceed with securing my own financial mask.  It won’t be this way every year.  And it’s ok to say no to charities if you’re not feeling particularly financially secure yourself.  It comes back around when things are steadier financially.

I am hopeful that summer will unfold differently for me.  But it’s only because I’m taking steps to secure my own mask first.  Then I can proceed with assisting others.

 

The Scarcest Commodity

The scarcer a resource is, the more valuable it becomes.  It works this way with oil and diamonds and the minerals that help to make up your smartphone.  And it works this way with your time.  The further we get into the spring semester the scarcer time seems to be.  Exams (and commencement!) are only a few weeks away.  Your schedule is likely full of papers and events and planning and bar exam applications and outlines and study groups and…..well, you get the idea.  I’ve been finding the same thing in my world as both my personal and professional responsibilities seem to be more than I am able to squeeze into my waking hours.  But we trudge on, we compromise, and eventually we get through it.

The compromising is the tough part.  Every decision to spend your time on one thing means not spending it on something else.  Your priorities become clear.  When faced with the decision of spending my Saturday night seeing some favorite musicians perform or meal prepping with my Instant Pot, I chose the concert.  But that left me without lunches for the week.  Yet another decision.  Do I buy lunch out, or buy something pre-packaged?  I’m busy, but I’m not rich, so I hit the frozen food aisle at my local grocery store and bought an assortment of reduced-calorie frozen meals to eat for lunch this week.  And while I was at it, I grabbed a frozen veggie lasagna for Sunday dinner.  Not the most delicious food ever.  But also not bad, and not outside my budget.  And I didn’t have to give up the Saturday night concert.  I chose to spend my time on fun rather than food, but also didn’t give up too much of my money in the process.  Quality of food is less important to me than quality of life (which for me generally means live music).

Every decision has a trade-off.  But it’s important not to let money be the thing you sacrifice.  You can do or have anything you want.  But you likely can’t do or have everything you want.  What’s most important to you? What are you willing to give up in order to have it?  Can you do that without blowing your budget?

Good Enough Is Good Enough

Sometimes “good enough” really is good enough.  This is a lesson that law students often struggle with.  Having always strived for (and often attained) perfection, it’s difficult for law students to retrain the brain to accept that “good enough” is very often quite acceptable.

I’ve talked before about how I am taking classes toward a Certified Financial Planner certificate.  This weekend I had a very full agenda.  And I had a quiz I needed to take.  Through the magic of online education, I have three attempts to complete and submit my quizzes.  On the first attempt I struggled and earned a 7 out of 10.  I thought about retaking it, but I was pressed for time.  I decided to wait and see what Sunday brought to decide if I would retake.  When I got to Sunday evening, I decided to take my 7 points and move on with life.  Reality is that the three points I lost will likely not affect my grade.  I’ll probably get a B in the class no matter how hard I try.  And that is good enough.

The bar exam is often the first testing hurdle you will face where the goal is not to get the best grade in the batch.  The goal is to pass.  Whether you have the highest passing score or the lowest passing score does not matter.  At the end of it all, if you have any passing score you become a lawyer.  If you waste your energy focusing on perfection, you are actually less likely to pass.  This is a case where good enough really is good enough.

It’s unlikely that you’ll ever be perfect with your finances.  You will someday pay a bill a few days late (or miss a month altogether when you have misplaced the mail).  You may experience a month when you are unable to pay your credit card in full.  You might buy a stock that tanks.  You may discover that your bank has been charging you fees you could have avoided.  There is always room for mistakes and room for improvement.  But the reality is that this is another area where good enough is good enough.  You may have temporary setbacks.  But if you continue striving to do all the right things, it will likely be good enough.

Perfection is difficult to attain and attempting to do so can wreck your mental health.  It’s ok to ease up on yourself.  Because in so many cases good enough is good enough.

Income Tax for Law Students

Everyone seems to have income tax on the brain right now.  The news is full of stories about people who are getting less of a refund this year than they did last year.  Is the reason the changes to the tax code?  Or did they just have less tax withheld from their paychecks?  Or is it both?  The world may never know.

I’m still working on my taxes right now, and things are definitely different from last year.  But the basics of filing your federal income tax as a law student are actually pretty much the same.  Here is what you need to know:

  • The Lifetime Learning Credit still exists, allowing you to reduce your tax liability if you had expenses for tuition and fees in 2018.  You will need to complete IRS form 8863 and Schedule 3 to claim this credit.
  • Student loan interest can still be claimed as an adjustment to income, reducing your tax liability.  You will need to complete Schedule 1 to claim this credit.
  • Student loan disbursements that you received DO NOT count as income.
  • Scholarships that do not exceed tuition and fees DO NOT count as taxable income.
  • If your income for 2018 is less than $66,000 you can e-file for free.
  • The 1040 form looks a lot different (shorter) than it did in the past.  And the 1040 A and 1040 EZ no longer exist.  But how you attack the process of filing really hasn’t changed much.

Filing your income tax can be intimidating.  But it’s definitely something that a law student should be able to handle on their own, without having to pay a professional.  The online/software programs available to help make it really easy.  And if you are getting a refund—that makes it all worthwhile.  And if you are NOT getting a refund, all the better.  That means that you have not been giving the federal government free use of your money all year!

Time Really Is Money

As some of you already know, I’ve been taking classes through Penn State’s World Campus to lead me (hopefully) to become a Certified Financial Planner.  My goal is two-fold.  First, I think this education will help me to better help my student population.  Second, I think this will lead me to a nice side-gig that I can pursue for a bit of extra income after I retire from Penn State.  This semester I’m taking a class in Corporate Finance.  At first I had my doubts about how practical this class would be for me.  But it turns out I really enjoy it.

Last week we started learning about something I’ve been preaching about for years:  the time value of money.  A dollar today has a different value than that same dollar a year from now.  If you put in into a savings account with a 2.0% interest rate that dollar is worth $1.02 in a year.  If that dollar was borrowed from a Grad PLUS Loan with a 7.6% interest rate, the use of the dollar is costing you an additional $0.076 for the privilege of using it for the year.  Whether you are saving or borrowing (I know…borrowing is much more likely at this stage in your life) it is important to understand the power of compounding interest.

There is a reason you’ll always hear someone telling you to start saving for retirement at the very beginning of your career.  The earlier you start, the longer your money has to grow.  The older the dollar, the more time it has to age.  That dollar that was worth $1.02 after one year is worth $1.48 after 20 years—and that’s at 2% interest.  With a more typical 10% retirement investment return that dollar is worth $6.73 after 20 years.  $17.45 after 30 years.  $45.26(!) after 40 years.  The longer the money has to grow, the more exponentially it is able to grow.

Much like you want your interest to compound for as long as possible when you are saving, you want it to compound for as short a time possible when you are borrowing.  Because student loan numbers can be scary, let’s look at a car loan.  Let’s assume you are borrowing $15,000 to buy a used car.  Your interest rate is 4%, regardless of the repayment term.  If you take 7 years to pay it off you will pay $205.03 per month and you’ll pay a total of $2,223 in interest.  If you shorten that to 6 years, you will pay $234.68 per month and you’ll pay a total of $1,897 in interest.  Shorten it to 5 years, and the payment is $276.25 and the total interest is only $1,575.  The shorter the term, the less interest you pay.  The same rules apply to your student loans and someday your home mortgage.  The shorter the time you take to repay it, the less you will pay in interest.

Next time you make a deposit to your savings account or borrow a little extra loan money, take a moment to think about the time value of money.  Every dollar is worth more (or less) than you think!

Budget on Fyre: Are You Floating?

There was some sort of major sporting event last night that a lot of people were watching on TV.  Since my husband and I were uninterested in the game, we decided to cook up a bunch of football food (my best chicken wings ever!) and settle in front of the TV to watch something we are very interested in:  documentaries about a music festival.

Both Netflix and Hulu are currently running documentaries about the Fyre Festival.  This April 2017 festival was advertised as the ultimate in luxury.  An island getaway for beautiful Millennials. Live music, fancy accommodations and food, excursions, and famous people. The ultimate place to see and be seen.  It sounded too good to be true.  Because it was too good to be true.  It was actually a Ponzi scheme that somehow came to an ugly fruition.  The more money the festival collected from the unsuspecting ticket holders, the more impossible it became to cancel the festival.  Ultimately the festival ended up being canceled after the guests arrived at the island to find FEMA tents with rain-soaked mattresses rather than the promised luxury villas.  There was no real food.  No real infrastructure.  The festival creator Billy McFarland had been spending the next month’s money before it came in to cover last month’s expenses.  When he paid the bills at all.

When I watched last night how McFarland had been spending money before he had it, I couldn’t help but think about how people often live on credit card float.  It’s a simple enough trap to fall into.  You use your credit card to pay for everything (reaping the credit card rewards), and then pay the bill in full at the end of the month.  It seems like you are doing everything right.  But what you’re really doing is falling behind.  You are spending next month’s money on this month’s bills.  And once you fall into it, it’s a difficult cycle to break.  The easiest way to avoid it is never to fall into it.  If you are a credit card reward junkie (like I am) you should make sure you aren’t falling into the float trap by having at least one month’s income in your savings account.  If you aren’t able to restrain yourself in that way, it’s best not to go down the float path at all.  Limit yourself to cash and debit card—forget about the rewards.

People tend to make some really bad decisions about their money.  In the case of the Fyre Festival, Billy McFarland made some really bad decisions about other people’s money (and is now serving six years in federal prison because of it).  Don’t be a Billy McFarland.  It’s best not to float.

What If: A Month Without Pay

The government has reopened!  But my heart goes out to the many people who went more than a month without pay.  Yes…they are going to be paid now, even if they were furloughed during the partial shutdown.  But that doesn’t take the sting out of not having the money when expected.

I, like so many, live paycheck to paycheck.  I have a tiny bit of savings, a really tiny stock portfolio, and a retirement fund.  I do not have the recommended three-to-six months of expenses tucked away in an emergency fund.  If I were to have to go without pay for a month I would be up the proverbial creek without the requisite paddle.  I suppose it could be worse.  My parents would probably be able to float me a loan.  Or I could borrow against my retirement savings.  I have credit cards I could use.  But none of these ideas appeals to me.  I’m 51 years old.  I’m supposed to have a strong understanding of money.  Yet here I am without emergency savings.  I’m flying without a safety net, mostly because I never thought about the fact that I might someday fall.

The government shutdown has really brought the importance of a contingency plan to the forefront.  What would you do if you found yourself without anticipated income for a month.  Would you be able to keep yourself afloat?  Do you have somewhere to turn for short-term help?  It’s always good to have a backup plan in place.  We never want to think about the worst case scenario.  But it could happen.  And you should prepare for it just in case.

Money is Like an Onion

I had the flu the first week of spring semester.  It’s a rarity for me to miss three days of work in a row for illness.  Especially at a busy time.  But the flu is the flu.  I didn’t want to share it.

While I was recovering I couldn’t help but think how the flu is like an onion.  It’s layer after layer of symptoms.  As soon as the fever broke, I realized that I was light-headed.  When I was finally able to breathe again, I realized that I was achy.  It was just layer after layer of symptoms, and the more difficult outer ones were distracting me from the lesser ones hidden underneath.

Money works like an onion too.  Big financial challenges make you ignore smaller ones that really deserve your attention.  A giant pile of credit card debt distracts you from the fact that you haven’t started saving for retirement.  You worry about your student loan balance so much that you fail to pay other bills on time.  You’re so concerned about paying the rent for the whole semester that you forget to budget enough money to buy groceries.  There’s always another layer.

Luckily money is a little easier to deal with than the flu.  If you look at things right it’s possible to see all of the issues.  It’s like taking a knife and chopping through the onion so you can see all of the layers at once.  You can (should) make a list of all the different money issues that are concerning you and tackle them in an order that makes sense for you.  You don’t have to peel away the bigger outer layers first. A budget (or spending plan if the B word scares you) can help you plan your attack.  Putting it all out in writing (or spreadsheet) can make a world of difference in seeing where you stand and where it makes sense to start.

So many things in life are layered like an onion.  But with your finances, you are able to chop it up and attack it in a way that works.