Grad School Calculator

Have always wanted to calculate if the MBA will be worth it even with a 120K price tag and loans. Here you can calculate the return on your graduate school education. Handy calculator for the grad school hopefuls!

LearnVest - Grad School Return Calculator

Question Their Authority

Always question the authority or legitimacy of anything you see. I love calculators that tell me how much I should save for retirement and calculators that will help me do away with debt. However, keep in mind that certain factors are assumed in most calculators that are not solely based on math.

For example, the ING retirement calculator tells me I will need $1,000 per month if I want to travel internationally. To me, this seems insane. However, I can always find a deal and maybe some people cannot. Who knows, maybe my standards of living will raise this much when I am in retirement. However, I doubt it. There is always a better way to spend money or give money away than five star hotels.

Also, note that ING and other companies want your money in their accounts because this is how they make money. Maybe they are overestimating the total needed for retirement because they want more of your money. There is such a thing as saving too much for retirement. When you are currently not enjoying life because you are socking 40% of your income into retirement, the situation has gone too far.

Therefore, always think about where your financial knowledge comes from and what is the objective of your source.

Double Check Everyone's Math

If you owe anyone money: student loans, a mortgage, etc., then make sure that their math is correct. I've calculated my government student loan payment recently and found that it is incorrectly calculated. I am paying more in interest every month then I should be according to all the amortization calculators that I was able to run.

After writing them an email, they responded by lowering my payment by $1.50 per month, we will see how they will calculate interest this month. However, it is hard to argue what they are charging because, unlike Sallie Mae, the DLS Website does not calculate daily interest and the outstanding interest is always the same throughout the month and is around $10, while it should be around $70.

My Sallie Mae payment is also incorrect due to pre-payments, but at least they are calculating the daily interest correctly, therefore, I don't mind paying a few dollars extra a month. However, if you are having trouble repaying your loans, every dollar counts, therefore, do the math.

Before Taking out Student Loans

Before you take out student loans, do a cost basis analysis. Will you spend more or less than you are expecting to make in returns?

Let's say that you want to get an MSW and become a social worker and it will cost you 80K in grad loans. You currently make 30K and think that you can get 40K if you had an MSW. That does not seem like a good return. If you do a loan analysis on a 15 year, 80K loan at 6.8% interest, you will pay $710/month in loans for 15 years. The 10K increase (which is not guaranteed) would bring you an extra $625/month if you cut 25% out in taxes. Therefore, you will be loosing money the first 15 years.

However, if you are currently earning 25K and think that you can earn 40K with an MSW after spending $40K on a degree, then it's worth it. The loan ()using the same terms) would end up being $355/month and the potential increase would be $937/month after taxes. It looks like you would be profiting around $582/month. That seems like a sound investment.

50-30-20 Budget Calculator

In my earlier post, I talk about the Liz Weston Budget. Now, MSN Money has put up a calculator on their website see how your budget breaks up in percentages and if you are on track if you follow this budgeting method. Please click below for this budget calculator:

50-30-20 Budget: A simple spending breakdown.

There are so many ways to budget out there, however, you know hat you are on track if you fit the definition of a strong budget for each personal finance expert such as Liz Weston, Suze Orman, or Gail Vaz-Oxlade.

How much house can you afford?

MSN money has a useful tool to see how much house you can afford. Before, going to get pre-approved, have an idea of how much you really want to and can take out in a mortgage. Use this tool to find out:

How much house can I afford?

Monthly, Bi-Weekly, vs. Weekly Payment

Ever wondered how much difference a bi-weekly payment will make vs. a a monthly payment on a loan? How much difference is there between a weekly loan payment and a monthly loan payment?

Now you can see using this calculator:

RBC Mortgage Payment Calculator

Federal Student Loan Consolidation

So you've heard about the federal student loan consolidation option and want to know more? Here are some answers to your questions. Remember that you can only consolidate federal student loans with federal student loans.

Why do it:

• You want a lower payment on your federal student loans 
• You want all your federal student loans to be in one place (you must have taken these federal loans out at different banks to want this)
• You have a variable interest rate that you want to fix

How does the interest work:

• The average weighted interest of your loans is taken, therefore, you do not gain an advantage consolidating student loans into the same term that you currently have as the payment will be the same

How is the monthly payment lowered with consolidation:

• The term of your loan "resets," you may pick a 20 year repayment or a repayment based on your income, for example

How can I know what my payment will be before applying:

• Use this online calculator

Are there fees:

• No

Where should I go to apply for a consolidation:

• Direct Consolidation Loan Website

Excel Templates

I just discovered a great way to have your own financial calculators that you can modify. For example, recently I have been struggling with the fact that I am paying off capitalized interest on my private student loan, which means that the whole payment is currently tax deductible. I had two options: pay off an extra $300/month on that loan or save that $300/month in a savings account.

Mathematically, it turns out that I should save $300/month in a savings account for the first 2 years and then pay off my student loan with those savings in the third year after I have paid off my capitalized interest. There is no way to run an amortization schedule where you can change the payment amount after 24 months and add a lump sump payment in the beginning of the third year. However, that and more can be done with Excel Templates.

I also like the fact that in an Excel template, you can save the worksheet and return to it when you feel like it. If you were to use the BankRate amortization schedule, for example, then you would have to reenter your data each time you wanted to change up your payment.

Excel templates offer amortization of payments, monthly and yearly budgets, expense trackers, net worth analyzers, gas and mileage logs, etc. New templates are added by users, so new ones can sprout up any time. Modify any of the templates to meet your specific needs.

Rule of 72

If you need to quickly figure out how long it will take you to double your money at a certain percentage rate, you can divide 72/percentage rate. For example, you found a mutual fund with an average return rate of 8% and you invested $1,000. You'll have to wait 9 years (72/8) for the investment to become $2,000.

Net Worth - The Millionaire Next Door

Some of you might have heard about the formula presented in the book - Millionaire Next Door by Stanley and Danko that determines your target net worth.

The formula looks like this: Target Net Worth = Your Age X Annual Pre-Tax Income / 10

However, everyone knows that after college, you most likely have a negative net worth. Therefore, many people have come up with their own formulas to compensate for that. Here is one I like by the author of the Simple Dollar Blog:

Target Net Worth = (Your Age – 27) X Annual Pre-Tax Income / 10

The second formula gets me a lot closer to my current net worth. It's off by $3K. The top formula places me about $90K off. 

Suze Orman Expense Sheet - Budget and Emergency Fund Planner

Another great budgeting tool is on the Suze Orman's website, Suze Orman's Expense Sheet. You enter your emergency fund amount and break down how much you spend each month by category. Then, Suze lets you know what your essential expenses are and based on that how large your 8 months emergency fund should be.

If a budgeting category is off from the national average, the cell will highlight yellow and by hovering over the cell, you can see what the national average is. If you are spending less, that's great. However, if you are spending more than the national average on a category, you should reconsider that expense even if you have an above average income.

At the end of the process that takes 2 minutes, Suze will tell you to beef up your emergency fund if you do not have 8 months of essential expenses. If your emergency fund fits the bill, she'll say that you should aggressively pay down any debt.

NetWorth IQ

There are several ways to track your net worth. The most convenient for me, has thus far been Mint.com because it does everything automatically. However, another way to track your net worth is through NetWorth IQ. Here are it's advantages and disadvantages.

Disadvantages:

1. You must manually enter all your data
2. All other people's data is manually entered as well and might not be accurate for comparison
3. You must enter your data every month to see the progress

Advantages:

1. You can track your net worth with a graph
2. You can see the percentage change in each category
3. You can make your net worth public so other people can comment on your progress
4. Making your net worth public might motivate you to get that number up
5. You do not need to give out personal login information
6. You can compare your net worth to others your age, or in your occupation, for example
7. You can also compare each category such as student loan debt, credit card debt, or retirement assets to others in your demographic groups

ING Compare Me

Ever wonder how you are doing compared to others your age that earn approximately the same income? There is a way to compare debts, savings, retirement options, etc. Go to ING Compare Me and fill out some questions.

MorningStar X-Ray of Your Portfolio

If you hold several stocks or mutual funds, chances are you are not aware of the percentage of your portfolio that is in US stocks or in utilities. A great way to know the exact breakdown of what you hold by percentage is to do the MorningStar X-Ray. You can also do this before you buy an additional stock or mutual fund to make sure that you are saturating your portfolio in one type of area (unless that's what you are looking for). It's always best though - to go for diversification.

Easy Conversion for Hourly Wage to Salary

Quick tip: If you quickly need to know how much your wage per hour equals in yearly salary, you could do it in two seconds. Multiply an hourly wage by 2,000 and the result will be the actual salary with two weeks of unpaid vacation. For example, $25/hour is $50,000 a year per this rule. Actually, it is $52,000. However, most hourly positions do not have paid holidays, so take away two weeks for vacations and you will get $50,000.

The Liz Weston Budget

Budgeting is always in question. I've written a post on budgeting earlier, please see Budgets. However, it's always great to see other opinions as well. Liz Weston is a supporter of the 50/30/20 budget.

This means that 50% of the budget should go to your needs such as shelter, food, transportation, minimums on debts, and utilities. I think 50% for needs is great because in case of a job loss, you can easily survive on half of your income by working part time.

30% of your income should go on wants like clothing, entertainment, and dining out. This is perfect, however, for those who are saddled in debt or are behind on retirement savings, this is a little too much. I would spend half of this on debt repayment or catch up contributions, if I had excessive debt or were behind on saving. If, for example, someone does not have an emergency fund, they should not go out and spend 30% of their money on things they want, but do not need.

20% of your money should go to savings and debt repayment. I think you should be saving a minimum of 15% for retirement per year, therefore, leaving you with 5% for debt repayment. 5% is unrealistic if you have a lot of debt.

Therefore, this is a great budget to follow when you have a fully funded emergency fund, you are on track for retirement, and you have a low debt ratio. I would consider a low debt ration to be below 10% of your take home pay or even lower.

When to Start Saving for Retirement

So, you've heard people say that the sooner you start saving for retirement, the better. If you are till not saving for retirement or are not saving enough, you probably were not shown the numbers. Use this CALCXML - Savings Calculator to see how much you would loose for every year that you delay savings.

Money in your 20's

Money management skills should be learned as early as possible and the 20's is a great place to start. Here are 10 financial projects you should take on in your 20's:

1. Learn to live on less than you make. Many people who find their first job, go all out with a new wardrobe, a new car, decorations for the new apartment, etc. Control your spending and only spend what you can afford with the money you have. See the Cash Flow blog post to see how you can see your cash flow with ease.
2. Start saving. Use the budget worksheet to see where you are overspending if you are unable to spend 15% of your take home pay. If you have large student loan payments, try to cut down in all areas to free up some space for savings, even if it's $5/month.
3. If your company offers a 401(k) match, start putting in the minimum amount you have to put in to get the full match.
4. Build an emergency fund in a high interest savings account.
5. Maintain a good credit score. Make sure you are never late. Automating your bills is an easy way to make sure of this.
6. Pay down on your student loan or any other debt with any extra funds that you have. If you receive a gift, a tax refund, or a bonus, try to apply it directly to your debt. See the Debt Pay Off Methods to see how you want to tackle your debt. See how even $5 per month extra will make a difference in your debt by using the Bankrate Amortization Calculator.
7. Save for retirement. Starting early is one of the best things you can do. Use a retirement calculator to see how much you should save. Start small if you can't contribute the full amount you are advised and increase your contributions yearly.
8. Designate separate savings accounts for various goals. Retirement should be saved in a 401(k) and an IRA. You should also have separate savings accounts for an emergency fund, grad school, vacation, car, down payment, etc. You can save in each account simultaneously or take it one step at a time and once your emergency fund is full, save for a vacation, once you have enough in that account, you can save for grad school and a car, etc.
9. Get health insurance. One accident can ruin all of your plans. 
10. Earn more money. Ask for a raise at the annual review or find a job that will pay you 15%-20% more and present the offer to the current employer. Be ready to leave for the new job if the offer isn't matched.

Estimate Your Tax Refund

If you haven't done your taxes yet and are expecting a return, then maybe an estimate of your return would be a motivator. TurboTax is great for doing your taxes or at least filling everything out and seeing what the refund will be and then trying to do get the same number yourself on paper copies.

Another great feature of TurboTax is their TaxCaster  - Free Tax Calculator. In less than a minute, you can receive a rough estimate of your return. I think mine is roughly $100 off.

Save the link for next year and play with your numbers in December so you know what to expect before 2012 rolls around and while you are still able to make some changes in 2011.