KNS Financial

Personal Finance From a Biblical Perspective

How to Choose A Career Path

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When considering a career path, one can feel overwhelmed by the various choices. In order to help you narrow down your choices, some well-meaning friend will tell you, “do what you love”, while another will say, “choose a career that will pay a lot of money”. Who is right in this case? How can you determine what path to take?

I was reading an article titled, “Doing What You Love Versus Doing What Pays” that looks at common advice on the subject. In reading the comments to that article, it seemed as though most of the readers would advise someone to choose a career path based on the potential income. Others still stuck with the “do what you love” advice that many hold to.

Career Path
Career Path

But is it really that simple? Let’s take a look at a few of the pros and cons to both of these views, and also see if there isn’t some other choice that we can make.

A Career Path that you don’t love but pays well:

Pros:

  • You will make a good amount of money
  • You will more than likely avoid the stress that comes from having a lower income (of course this ultimately depends on your financial discipline)
  • The added income may give you the financial freedom that you need to pursue what you love, as a hobby – or at least to not focus on the income it generates
  • You may be able to retire faster and then do what you love full-time

Career Path
photo credit: HikingArtist.com

Cons:

  • If you dislike a particular field, it may be harder to gain enough of an expertise in order to be highly compensated (for instance, those who hate math will not make top notch engineers)
  • You may be required to give up quality time with family and friends in order to accomplish your salary goal
  • Some people with higher incomes find it harder to exercise financial discipline than those with lower ones
  • Many high paying careers paths are also considered to be the most stressful
  • This stress will impact your relationship with family and friends over the long run

A Career Path that you love, regardless of the pay:

Pros:

  • Your love of that field will make you a great student, and so you may excel to the point where you are a top earner in that sector
  • You will have a sense of fulfillment and happiness from your work
  • The lower salary may force you to develop financial discipline
  • You may have lower levels of work-related stress

Career Path

photo credit: icadrews

Cons:

  • Lower salary – you may have to live a much simpler life
  • May take you longer to retire – this may not be a big issue for you if you absolutely love your job
  • If you lose your job, it may be harder to find a new one – although there are a few low paying jobs that are in demand

A couple of things to note. First, this is by no means an exhaustive list. Actually, I am counting on your comments below to help fill in the missing pieces. Second, you will notice that many of these points use uncertain terms like “may”, or “many”; this is due to the fact that many of these will not be true in EVERY case.

My take on choosing a Career Path is this:

I think that the answer to this question is different for everyone and is a matter of prospective. My initial reaction to this question was, “If you can get paid a ‘decent’ living wage for doing what you love, go for it! We wouldn’t have teachers, social workers, or pastors if people didn’t follow this line of thinking.” I also said to myself, “Money isn’t everything, and if you have to be miserable for 10 hours/day just to make a few extra dollars, it probably isn’t worth it.”

Do what you love, and if the pay isn’t great, lower your standard of living to match your pay. You can’t determine your standard of living apart from your income. In other words, LIVE WITHIN (or actually below) YOUR MEANS! This is true no matter what your income turns out to be.

However, for many there is little to no career opportunity in what they “love“. In that case, find a balance. Do something you like, and if it doesn’t pay enough to maintain your desired standard of living, try to make a few bucks from what you love. Like others have said, don’t choke the life out of what you love by focusing on money, but maybe you can be a consultant in that area or start a blog giving advice about it.

Ultimately, we should be content with whatever financial/work situation in which we find ourselves. In the words of the Apostle Paul:

Not that I speak from want, for I have learned to be content in whatever circumstances I am. I know how to get along with humble means, and I also know how to live in prosperity; in any and every circumstance I have learned the secret of being filled and going hungry, both of having abundance and suffering need. I can do all things through Him who strengthens me. ~ Philippians 4:11-13

We see from this passage that our situation should not be able to determine our satisfaction or contentment in this life – especially if we are slaves to Christ!

Personally, I happened to “like” a field that is in good demand (Economics & Finance). However, my true love is Theology, and that may be something that is in my future.

What about you? What choice did you make? Any regrets? How would you advise someone in choosing a career path? Would you tell them to look for money, happiness, or both?

To help you in your choice, Payscale.com has released it’s list of “Best Undergrad College Degrees By Salary”:

Degrees Degrees
Methodology
Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 2 years of experience; mid-career have 15 years. See full methodology for more.

Not an engineer or an economist? Here is the full list: http://www.payscale.com/best-colleges/degrees.asp

Be sure to leave your comments below.

 

photo credit: jeremy.wilburn

What Your College Won’t Tell You About Your Money

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The following is a guest post from Martin of Studenomics, where he tackles what to do after college and anything else that could be on your mind when it comes to money.

September is here. As much as I hate to type this, it’s certainly true. The back to school commercials are up. It’s getting cooler outside. You have to wear a sweater at night. You now have to wake up before noon.

School is here.

Before you get depressed, let’s cheer up! Next summer is only a few months away or so…

I wanted to share with you what your college won’t share about going back to school so that you survive financially. I don’t want you to end up in thousands of dollars in debt. I don’t want you to be paying off student loans into your 40s. I want you to be debt-free early on. If I can do it, anyone can.

What Won’t Your College Tell You About Your Finances?

College Financial Literacy

You Can And Should Work.

Yes, you should be working. If you work even a little bit, this will help you out with your debt in the future. Every dollar today counts. You won’t get rich, but you’ll dent your debt while in school.

You also can’t fool me here. I always had an active social life and I still held a job. I know that you think you’re busy, but trust me, we all waste time. Working forced me to manage my time better and not to mess around. Those hour-long bus rides were my saving grace before finals.

But Martin! I can’t work, I swear.

If you’re program is too intense to even work a few hours per week, then you can work during your time off or apply for a work term. Either way, you should work during college. It will get you into the habit of being a real person when you graduate and it will help you cover some of your bills.

It’s also not too late to apply for a work term. You can try to get in for the next term or some time in the future. Please try to apply at least. You might have to give up your summer, but you’ll have money to help with bills!

There’s Free Money Available To You.

Money should never hold you back from a quality education. Every college offers all kinds of financial assistance. You can apply for any or all of the following:

  • Scholarships.
  • Bursaries.
  • Grants.
  • Awards.

You have nothing to lose from applying. I suggest that you take the next rainy afternoon to apply for all of these forms of financial aid. The worst case scenario is that they say no.

I dated a girl who would get insane amounts of financial assistance every year. She simply applied for everything because she was poor.

Think about it this way: if you get paid $12 an hour, how long would it take you to earn $2,000? Now imagine writing an essay in an hour that leads to $2,000. Not so bad, right?

Where do you find out more about financial help?

Every college has an office for this and a portion of the website dedicated to finances. It’s usually pretty easy to figure out. You can look for specific bursaries, scholarships, grants, or awards. They offer ones for each program and even for every specific niches.

All you have to do is print out the forms and submit them before the deadline.

There Are Plenty Of Free Resources (And Awesome Stuff).

There’s so much free stuff out there. You just have to look around.

For example, you can easily workout without a gym membership when you can’t afford it. However, as a student you might have a free gym membership as part of your package.

A Few Other Free Or Cheap Things To Look Out For:

  1. Concerts on campus.
  2. Student discounts.
  3. Health benefits.
  4. Resources (resume writing help, job search, etc.).

Don’t spend money that you don’t have on things that can be free to you or close to it.

This Is The Best Time To Live On The Cheap.

Let’s be honest here. One of the most charming aspects of college is the extreme frugality that we go through. This is the one time in your life where frugality is embraced. Being a poor college student will force you to make the most with the least.

For example, my brother can eat off nothing. Seriously, he’ll spend a $100 over a month sometimes on food. I have another friend who has had the same pair of shoes for years. He wears these shoes everywhere (formal events as well). I personally believe that he might be better off going bare foot at this point.

How cheap will you be as a student?

Watch Who You Hang Out With.

I know, that you’re a grown up. This doesn’t meant that you won’t make plenty of mistakes. All I’ll say is that you have to watch who you hang out with. If you get involved with the crowd, you can easily start spending money and racking up the debt on things that you don’t need. Your friends in college are very important.

I wish you all the best in college. I hope your grades are through the roof and that you manage to survive financially. Even if you apply one of these tips, you’ll thank me one day.

Don’t forget to check out Studenomics!

Subsidized Versus Unsubsidized Stafford Loans: Why Knowing The Difference Can Save You Thousands!

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It’s that time again! People are looking to go back to school and are searching for information on subsidized versus unsubsidized Stafford Loans. I’ve actually had two friends ask me about the difference already.

Although, I hate the fact that many of us graduate with student loan repayments, I know that it has now become a fact of life. There are two main differences, which we will discuss below. We will also take a look at many of the details that make these two options very similar.

Subsidized Versus Unsubsidized Stafford Loans

What Is A Stafford Loan?

Taken directly from the Federal Student Aid website:

Direct Stafford Loans, from the William D. Ford Federal Direct Loan (Direct Loan) Program, are low-interest loans for eligible students to help cover the cost of higher education at a four-year college or university, community college, or trade, career, or technical school. Eligible students borrow directly from the U.S. Department of Education (the Department) at participating schools.

These are different than the private student loans that you may receive from a bank or other financial institution. When evaluating the differences between subsidized versus unsubsidized Stafford Loans, it is important to remember that in both cases, you are borrowing directly from the federal government.

Eligibility For A Federal Direct Loan

Eligibility For Subsidized And Unsubsidized Stafford Loans

Since subsidized and unsubsidized Stafford Loans are part of a student’s federal financial aid package, there are a number of requirements that must be met in order to be eligible for a direct loan:

  • U.S. citizen or an eligible non-citizen with a valid social security number
  • Working toward a degree or certificate in an eligible program
  • Enrolled at least half-time as a regular student
  • At a school that participates in the Direct Loan Program
  • Have a high school diploma, GED or pass an approved ability-to-benefit (ABT) test
  • Register with the Selective Service if you’re a male between 18 and 25
  • Maintain good grades
  • Must not be in default on a federal loan

How To Apply For A Direct Stafford Loan

In order to apply for subsidized Stafford Loans (or even unsubsidized) you must complete the Free Application for Federal Student Aid (FAFSA). You can complete the application online, and the level of financial aid which you are offered will be determined by many factors.

Once you receive your award package, the details regarding what loans you are eligible for (as well as other types of financial aid) will be included.

Hopefully, you will receive enough in aid and grants to cover the cost of your education (when combined with any savings you may already have). If you have to borrow money for your education, then you should take advantage of the subsidized Stafford Loans first.

Borrowing Limits For Unsubsidized And Subsidized Stafford Loans

YearDependent Undergraduate Student (except students whose parents are unable to obtain PLUS Loans)Independent Undergraduate Student (and dependent students whose parents are unable to obtain PLUS Loans)Graduate and Professional Degree Student
First Year$5,500—No more than $3,500 of this amount may be in subsidized loans.$9,500—No more than $3,500 of this amount may be in subsidized loans.$20,500—No more than $8,500 of this amount may be in subsidized loans.
Second Year$6,500—No more than $4,500 of this amount may be in subsidized loans.$10,500—No more than $4,500 of this amount may be in subsidized loans.$20,500—No more than $8,500 of this amount may be in subsidized loans.
Third and Beyond (each year)$7,500—No more than $5,500 of this amount may be in subsidized loans.$12,500—No more than $5,500 of this amount may be in subsidized loans.$20,500—No more than $8,500 of this amount may be in subsidized loans.
Maximum Total Debt from Stafford Loans When You Graduate (aggregate loan limits)$31,000—No more than $23,000 of this amount may be in subsidized loans.$57,500—No more than $23,000 of this amount may be in subsidized loans.$138,500—No more than $65,500 of this amount may be in subsidized loans. The graduate debt limit includes Stafford Loans received for undergraduate study.

As you can see in the chart above, you are allowed to have both unsubsidized and subsidized Stafford Loans in the same year. This is good for those students for whom the out of pocket expense will be greater than the subsidized direct loans limit.

Repayment Of Federal Direct Student Loans

The one good thing about both of these types of student loans is that you aren’t required to pay them until after you drop below half-time status for a period of at least 6 months. If you maintain half-time status from start to finish, you will not be responsible for making any student loan payments until after you graduate.

Another good thing is that if you need to take a break from school for longer than 6 months and you begin to make payments (see “grace period” below), once you enter another eligible program (or continue on in the same one) your loan payments will be placed on hold once again. This is great for people who decide to go back to school after a break, or who are seeking an additional degree.

The main point to remember is that while you’re enrolled in an eligible program at least half-time, you are not required to make any payments on your federal student loans. Try to use a student loan calculator to determine what your monthly payments will look like after graduation.

Federal Student Loan Grace Period

Once you graduate, leave school, or drop below half-time enrollment, you have a period of time before you have to begin repayment. For federal Stafford Loans, that “grace period” is 6 months.

Theoretically, this gives a new graduate 6 months to find employment and cover their job hunting expenses, before they begin to repay their student loan. Although, I’m sure that many graduates would like much more than 6 months before those payments start up! Once the 6 months are up, they may considering becoming a part of the contingent workforce, in order to pay back the loan.

Although, with the current state of the economy, I can picture more and more graduates trying to get student loan forgiveness in order to wipe away their debt.

Unsubsidized Versus Subsidized Stafford Loans: So What’s The Difference?

Up to this point, most of the specifics regarding Direct Stafford Loans apply to both subsidized and unsubsidized. However, there are two distinct differences that makes one significantly more appealing than the other.

Interest Rate On Direct Stafford Loans

This is the first area in which you will find a difference between subsidized Stafford loans and unsubsidized Stafford loans. The date in which interest begins to accrue on the loan depends on which type you have received – which makes a huge difference in how much you will ultimately pay back to the government!

Unsubsidized Loans

As I mentioned above, you are not required to make any payments toward your federal student loan while you are at least a half-time student. However, from the moment your unsubsidized Stafford loan is dispersed, interest begins to accrue.

That means that once you graduate, you will owe more money to the federal government than you took out in loans! As you are taking your classes, interest is accruing on the money that you borrowed. This accrued interest adds thousands of dollars to the balance of your loan, making it that much harder to pay off.

Subsidized Loans

As the name implies, there is a “subsidy” attached to these loans. While you are in school (at least half-time), no interest is charged against your loan. For all intents and purposes, the loan is being subsidized by the government, who is paying the interest for you.

So, those thousands of dollars that get added to the balance of your unsubsidized student loan, aren’t added to your balance if you have a subsidized Stafford loan!

How Are They Awarded?

Subsidized Stafford loans are awarded based on your financial need. They are considered to be a part of your overall financial aid package, and therefore, you can be awarded less than the maximum amount. Here is an explanation of the difference from the government’s student aid website:

Depending on your financial need, you may be eligible to receive a subsidized loan for an amount up to the annual subsidized loan borrowing limit for your level of study. If you have education expenses that have not been met by subsidized loans and other aid, you may also receive an unsubsidized loan so long as you don’t exceed the combined subsidized and unsubsidized annual loan limits.

So, even if the federal government decides that you and/or your parents earn too much, and therefore, you do not qualify for a subsidized student loan; you can still take out an unsubsidized Stafford loan – up to the combined annual loan limits. This is important to remember especially if you are a broke college student – you can actually borrow more than the cost of your tuition to spend on books and other things.

Unsubsidized Versus Subsidized Stafford Loans: Which One Is Better?

Since the interest accrues immediately on an unsubsidized student loan, most students will want to avoid that option at first. However, since the subsidized Stafford loan is awarded based on the financial need of the student, many times the award is not enough to cover all costs.

The ideal situation – besides having more than enough aid and savings to cover all costs (learn how to save money on textbooks) – would be to only need to take out a subsidized Stafford loan. This way, you don’t have to worry about amassing interest on your loan until after you have completed your education.

If you must take out an unsubsidized Direct Stafford loan, then be sure to pay off (at least) the interest each month. That way, when you enter into the repayment phase of your loan, you will only owe what you initially took out.

Graduation Gift Ideas That Dont Take A Lot Of Effort!

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[ The following is a post on behalf of Deal Taker]

It’s that time again where budding minds of America (even the students who gamble on their grades) are celebrating the completion of a stage of their educational careers!  Whether from high school, college, or grad school, friends and family members are emptying the shelves of the greeting card aisles, picking up roses from the gas station, and balloons from the local store – but that is the easy part. What about the real graduation gift ideas?

Thankfully, there are a number of tried and true graduation gift ideas out there, some take a little time and planning, and others you can just grab and go!

Graduation Gift Ideas For Lazy Shoppers

Money: The Easiest of Graduation Gift Ideas

Money is the perfect gift for EVERY occasion!  Everyone likes money, everyone wants money, and every graduate I know needs money! For the student heading off to college, money for school books or basic living expenses can be helpful so they can avoid getting into debt.

And for those going into workforce, those funds are useful as a jump start for student loan repayments, or possibly for living expenses while finding a job (since job hunting expenses aren’t tax deductible if it’s your first job).

Moving Van/Truck Rental

Many recent graduates will need to rent a moving truck in order to enter into the next phase of their life. If they are heading off to college, they might decide to live on campus, which may require them to move a significant amount of their possessions (depending on living arrangements).

For those who are done with college, they will need to either move back home, or move into their own apartment!

They may be able to stuff everything into their own vehicle, but that might not be possible depending on their situation. Find out from them whether or not they will need to pay to rent a moving truck/van. If so, you can offer to cover the expenses!

As long as you don’t offer to help them move, this can be one of the laziest graduation gift ideas ever!

Job Essentials

If your recipient is a college graduate, there are many gifts that can help them prepare to step into the business world.  It can be quite a transition from jeans and sweats to business suits and dress shoes, so appropriate attire would be a welcome gift.  You can always save by using a gap coupon code on apparel, or by purchasing a gift card from retailers like Amazon.com.

Electronics have now become a staple as business tools and any graduate would be grateful for such gifts which may be immediately out of their reach.  A laptop, iPad 2, and/or Kindle, has become a necessity for most in day to day life.  A GPS device would be a great gift for someone as they drive to various job interviews, or an MP3 player for the person using public transportation daily.

Keepsake Gifts

Gifts that memorialize this special occasion in the graduate’s life are often times the most treasured.  One way to mark the graduation is with an engraved gift.  The wonderful thing about such a personal touch is that it can be applied to many gifts from jewelry to a leather portfolio or stylish pen.

On the lighter end of the budget are gifts that may just mention the graduation year like a coffee mug or teddy bear in graduation garb. Another great idea is to consider making homemade gifts!

photo by Ian Kahn

Your Turn!

  1. What’s Your Lazy Graduation Gift Idea?
  2. Have you ever received or given any of the gifts above?
  3. Do you enjoy giving gifts that take a lot of effort, or do you like the lazy approach?

Should You Give Your Kids An Allowance?

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One of the many struggles that parents have is over paying kids’ allowance. Of course, the question of whether or not to pay one is very common. Some people feel as though a child should not be given an allowance at all, while others feel as though it is a great opportunity to train their children.

[Find out what NJ High Schools are doing to teach personal finance and budgeting to students]

Beyond that struggle is the question of how much and how often to pay; and also if the payment should be tied to various chores and other responsibilities, or if the kids’ allowance should just be based on general obedience. As with most things, there probably isn’t a clear cut answer to this, because every child is different, and there are pros and cons in each case.

Still, that doesn’t prevent us from taking a look at this issue.

Should You Give Your Kids Allowance?

Pros

Teach Them Financial Responsibility

Once you start giving your kids allowance, you can teach them how to manage money. There are many different aspects to this – some of which we will discuss below – and although each one can be taught without giving your child an allowance, using real money can make things easier.

Understanding The Value Of Money

The first thing should happen when we pay our kids an allowance is that we teach them the true value of money. Kids aren’t born understanding the function of money in this society (I’m unsure if most adults understand this). They think that their parents have an infinite supply of money, or that it “grows on trees”, as our parents used to say.

Giving them an allowance, and making them responsible for saving, giving, spending, and maybe even investing, will help them to see how important each dollar truly is.

When they are spending your money it’s really easy for them to simply give in to their impulses. However, once they are down to their last dollar, they’ll have to give a lot of thought toward how to spend it. And if they don’t, they will have to deal with the same “buyer’s remorse” that adults experience.

Use their allowance to teach them to weigh their options and make the best possible decision.

Saving

Giving your kids allowance creates the perfect opportunity to teach them the importance of saving money! You can have them set goals and save toward them. It may be small and somewhat trivial like buying a PlayStation 3 Dualshock 3 Wireless Controller (do kids even play with Play Stations anymore?), or something more meaningful such as a birthday gift for their brother or sister.

Either way, they get to learn early lessons on the importance of saving and planning. To make it more interesting, you can provide an incentive to your child’s saving efforts. Maybe you can kick in $5 for every $50 that they save, or “pay” them regular interest!

Giving

To me, giving is an important part of any budget; and if you feel the same way, you’ll want to teach this lesson to your children early. Giving your kids an allowance is a great way to accomplish this! If you belong to a local church, that’s a great place to start! If not, then have them identify something that’s important to them.

Then you can find a charity that supports them (maybe an orphanage in Haiti), and have your child set aside a part of their allowance for donations.

The Cons Of Giving Your Kids Allowance

Despite these reasons, there are a number of people who don’t agree with the idea of paying an allowance to your children. By doing so, you can inadvertently spoil your child, and make them feel as though mom and dad are nothing more than just ATMs!

It Spoils The Child

Giving your child an allowance could help to spoil them. Keep in mind that you’ll probably buy them different toys, gifts, candy, etc. throughout the year, so adding a regular weekly or bi-weekly payment, can give your children a sense of entitlement. Of course, this isn’t a guarantee, but it does raise the chances of this happening.

This may cause your children to see you as an ATM, rather than as a parent!

Doesn’t Teach Them To Depend On Hard Work

By giving your kids allowance, it may make it difficult to teach them the concept of working hard for money. If someone gives you money each week, you may become conditioned to getting money without working for it. Many people in this society resent hard work and discipline – of course we can’t blame allowances for that, but it is something that you have to watch out for.

[What’s the connection between Hard Work and Faith?]

If Connected To Chores, They Don’t Feel A Sense Of Responsibility

I believe that chores are best used as a way for children to contribute to the household and feel a sense of responsibility. By attaching them to a payment, they may not see their chores as a non-negotiable obligation, but they might just regard them as something to do when they need money!

So what happens when they get money for other things (birthday, Christmas, or good grades)? They may lose the motivation to do their chores, and you end up in a battle trying to get them to handle their responsibilities around the home!

So What’s The Answer?

I believe the answer to this issue is to take all of these things into consideration. If you choose not to pay an allowance, make sure that you look for other opportunities to teach your children proper money management. Of course, if you do decide to go pay, try your best to avoid some of the cons listed above.

Ultimately, it comes down to how well you know the individual character traits of your children and what priorities you have set for your household.

photo by GoodNCrazy

Reader Questions

  1. Did you get an allowance when you were a kid?
  2. What do you think are some potential problems to doing this?
  3. Do you think there is a particular age when you should start?

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