Great Advice On Whether to Take a Student Loan

Here's an article every parent and child considering attending college should read.

On college decision day, don’t sentence your child to decades of debt (msn.com)

TLDR:  Just say no.

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This is not financial nor education advice. Please consult a professional advisor.

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On Solving the Student Loan Debt Problem

 “If I had an hour to solve a problem I'd spend 55 minutes thinking about the problem and five minutes thinking about solutions.” ~ Albert Einstein

Here's how I would define the problem:

We give unlimited loans to 18 year olds who may choose a major that is unlikely to lead to a job that pays enough to easily cover the loan payment after normal living expenses.

My solution is to gather the data on pay that graduates of different majors get from their jobs.   Normalize living expenses for location differences.  Calculate the maximum loan payment a graduate can make, assuming wage growth over 10 years.   Set a maximum loan amount for that major by school.

Seems relatively doable to me.

I would do this work before forgiving any student loan debt.  Otherwise, student loan debt will become an issue again in the future.

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This is not financial nor education advice. Please consult a professional advisor.

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Avoid Getting a Student Loan

"I guess some mistakes you never stop paying for." ~ Roy Hobbs in The Natural

In my humble opinion, student loans are one of the biggest financial scams that is legal.  Student borrowers are not evaluated on ability to repay the loan.  Students are told the loan is an investment.  Students are encouraged to take a large a loan as needed to pay college costs.  Who is advising student borrowers?  It's usually the educational institution receiving  the money.

What should a student do if they can't afford a going to a college of their choice?   Choose a cheaper college is the first option.  If all four year institutions are too expensive, choose a community college for the first two years, live with parents and transfer after two years.  Or start working, go to college part time, and even have your employer cover part of all of the costs.  Finally, join the armed services and afterwards, go to college on the GI bill. All these options enable a person to get a college education.

The best part is one can avoid, or at least minimize the amount of, student loan debt.  This would prevent a student from becoming one of the many overburdened by student loan payments.

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This is not financial nor education advice. Please consult a professional advisor.

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Buy Low and Sell High

"In theory, there is no difference between theory and practice.  In practice, there is." ~ Yogi Berra

 A great investment adage is " Buy low and sell high."    The trouble is that the advice is very difficult to execute.   The results is traders and investors often buy high when the market is euphoric and sell low when the market is depressed. 

Here's how I try to manage keeping my emotions in check:

• We have a core portfolio that we do not trade.   These are my wife's accounts, in which her holding period is forever, and our managed accounts.  For the managed accounts, I will sell periodically to take profits, but will  not go below the investment minimums.   Thus, we are always "invested in the the market" with part of our funds.
• In our trading account, I am biased towards buying when the market declines and biased towards selling when the market rallies.
• Since equity trades are commission free, I will scale in when buying, as little as one share at a time and scale out when selling, as little as one share at at time.  That way, I don't feel regret if the stock falls after buying or rises after selling.   I still have more to buy or sell.   The downside is I only buy a few shares at the bottom or only sell a few shares at the top..

It has been working for me in the 2022 kangaroo market.   Of course, it will probably only keep working, until it doesn't.

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This is not financial nor investment advice. Please consult a professional advisor.

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Fixed: Check Engine Light P0442, P0456, P0446

When our vehicles have a Check Engine light showing, I take it to our local AutoZone for a free diagnosis.

In the past, when our 2004 Toyota Corolla had a check engine light it was usually P0442, which was 

likely the fuel tank cap not being closed completely.  However, the fall of 2021, the check engine light started showing P0446 and P0456, which are also small EVAP leaks and possibly could be a leak in the fuel tank cap.  However, I was sure that I had tightened the fuel cap each time.   

At first it was a P0442 code. I took the following steps to address the problem:

• Cleaned fuel tank cap gasket and fuel tank filler pipe.
• Make sure the fuel tank cap clicks when tightened.

After a several fill ups the check engine light went off.

But the check engine light returned.  This time as a P0446, which sounded possibly worse.  Again, I took the same steps:

• Cleaned fuel tank cap gasket and fuel tank filler pipe.
• Make sure the fuel tank cap clicks when tightened.

And the light turned off again after a few fill ups.

But after a few weeks, the check engine light returned as a P0456.   It did not go away after a few fill ups.

I decided to do a cheap DIY repair:  Buy a new Toyota OEM gas cap.  (I read that secondary market gas caps often have leaks that cause a check engine light.)    The cost was only $25.   After several fill ups, the check engine light went off and hasn't come back on.

Saved at least $100 since that was the cost for a mechanic to diagnose the issue.

Disclosure:  No compensation was received for this post.

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This is not financial nor car maintenance advice. Please consult a professional advisor.

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Tax Planning to Minimize Tax Liability

I completed my 2021 tax returns and put them in the mail last week.  Now,  I'll be planning our tax strategy for 2022, specifically income and deductions.

As a retiree, I have some ability to influence our yearly income since we have no W-2 wage income.  In the past, our only regular income was rental income, interest and dividend income.   The rental income has been about the same for years.  Interest and dividend income varied.   Two incomes that are able to be manage:  Capital gains income and IRA distribution income can be controlled each year.   By taking more or less Capital Gains or IRA distributions, I can predict what our tax liability was for the year.

In 2022, will have some additional income that we no or less control over.   I started taking Social Security this year.  In addition, my spouse will need take RMDs from an inherited IRA over the next 10 years.  So it will even be more important for us to manage our discretionary income sources in 2022.

My goal is to keep our income in the 12% tax bracket and in the 0% long term capital gains tax bracket. 

My tool for managing our tax liability is Excel.    Each year, I put the forms into Excel spreadsheets and link the numbers as done on the tax forms.  That way, I can make changes and determine the effect on the tax owed.   I find using Excel easier and better than using tax software.   Excel allows me to make changes and see the reasons that cause the changes in our tax liability.   It's easy to run different scenarios.

The only downside is I need to do the update to the tax forms myself.   But that is a small price to pay for the benefit I get.

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This is not financial, investment nor tax advice. Please consult a professional advisor.

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Buying and Laddering CDs and Treasuries

With the Fed raising interest rates, the interest paid on CDs and Treasuries has risen also, to respectable levels.  One year ago, I was only able to  get 0.1% on a 1 year CD.  Now 1 year CDs are in the 1.25-1.4% range.   2 year CDs are paying 2.20%.  Much better than the savings/sweep accounts are paying only 0.01%.

Yeah, I know, inflation is coming.   However, these funds are intended to be available when needed.   Thus, doing a CD/Treasuring ladder is an acceptable alternative to get higher interest rates while waiting.  Currently, I am only laddering out to 3 years since the yield curve is flattening after 2 years.

Hopefully, inflation will get under control.  But if CD/Treasury rates go up to 5% or higher, I will definitely add more funds to fixed income.

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This is not financial nor investment advice. Please consult a professional advisor.

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House Votes to Increase RMD Age

On Tuesday, the House passed Secure Bill 2.0 which includes raising the RMD, requirement minimum distribution,  age from 72, in steps,  up to 75.   The RMD effectively causes retirees to take taxable distributions, whether they need the money or not.  It effectively causes retirees to pay higher taxes while reducing the amount of saving in tax deferred retirement accounts.

From the Barron's article:

"Key provisions of the House bill passed Tuesday include: 

● Raising the age at which seniors must take required minimum distributions, or RMDs, from their retirement savings accounts to 73 from 72, effective next Jan. 1. The bill will raise the age to 74 starting in 2030 and to 75 starting in 2033."

This provision would benefit many retirees and help them keep funds needed for retirement rather than pay taxes on funds they don't yet need.

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This is not financial, tax nor retirement advice. Please consult a professional advisor.

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Ugly First Quarter 2022 Investment Returns

NGL, our investment returns for January through March 2022 were horrible.  We have given back all, yes all, of our gains from 2021 in only three months.    It would have been worse, except the market has rallied since mid March 2022.

For now, I remain cautious.  We're keeping our core positions, selling off peripheral investments, and buying a few value stocks. 

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This is not financial, retirement nor investment advice. Please consult a professional advisor.

Copyright © 2022 Achievement Catalyst, LLC