My Personal AP Journey

Hey Paul: A couple of follow-up questions on AP exams. One, how many AP classes did you take? Two, did you help your daughter study for her AP classes?

 Sure, I don’t mind sharing a bit of personal history. I graduated from (the real) Jessamine HS in 1987 when they only offered three AP courses. I took AP Calculus from Mr. Barnes and passed the exam. So by US News standards I was college material but only barely. I also took AP US History but memorizing facts is not my thing. AP English was offered but as may be apparent from the occasional grammatical errors in my columns, I didn’t take AP English.

When my daughter, Bethany, was studying AP Biology she asked me something like “How does the endoplasmic reticulum communicate with the mitochondria?” My answer was that I didn’t think they were on speaking terms but the medulla oblongata is important. That was the last time she asked me a tough science question that if I ever knew the answer, it was forgotten shortly after the exam a few decades ago.

I was able to help her work through a few Calculus problems but even there my skills were a bit rusty. So Bethany was like every other AP student – she was primarily on her own learning the challenging theory these classes present.

 

 

 

 

 

 

Advice for the “Average”

Hey Paul: I am average – in school, sports, size, and just about everything else. I won’t be going to Centre College as a pre-med major. I don’t take the advanced classes in school. I am not on a varsity team with the dream of a full-ride college scholarship. I am not a leader of any group. What advice can you give me?

In writing an “advice column” I wrestle with many factors – sounding authoritative but not a know-it-all, suggesting simple solutions but not over-simplifying complex issues, and suggesting paths to success with the realization that some paths are closed to many people.

The last few weeks I have focused on questions related to college with a focus on AP tests and other high-end academic pursuits. According to US News and World Report’s high school rankings, WJHS and EJHS have 46% and 28% of students who take at least one AP class. So you are in good company with a half to three-quarters of the students who are not taking an advanced class. By my estimation it is only the top 10% of students who are regularly taking AP classes at the local high schools.

US News goes on to assign a College Readiness Index based on AP participation to high schools. WJHS was a 35.5% and EJHS at 18.7%.  My suggestion in last week’s column on stringing together a half dozen AP exams probably appears unfathomable to the majority of students. So dialing back a bit – how about one (or two) AP classes as a goal?

Sports are big part of American culture with the victories of our local teams shared each week in this newspaper. As a former athlete, tortured fan of the Bengals and Reds, and semi-retired coach after dozens of rec league seasons, I have seen the upside and downsides of sports participation. Sports, somewhat like academics, favor the naturally gifted with fierce competition for playing time among the teammates (and occasionally their helicopter parent).

I do believe that some participation in sports is excellent at all ages and ability levels. By sports I mean exercise with an elevated heart rate. The addition of archery, bass fishing and bowling to the local high school teams don’t count. My personal bias is towards running – cross-country or track. The comradery of the local high school teams is terrific with the opportunity to measure your improvement and success against the clock.

A college admissions form once asked applicants to check a box if they considered themselves a “leader”. The story goes that a young man perhaps much like yourself couldn’t honestly identify any leadership skills so checked the no box. On his acceptance letter the admissions committee thanked him for his honesty and noted that he would be joining 5475 self-reported leaders at the University. Too many chiefs, not enough Indians.

Seriously I think the role and perceived importance of being a leader is over-rated. Yes, we need leaders in our homes, schools, and communities but a leader without contributors won’t accomplish much. I wouldn’t worry about not having a list of leadership roles to put on your resume’ – focus on adding value wherever needed.

A final note on being “average in everything”. I think you are selling yourself short. While college admissions or even society is fixated on a small number of metrics – test scores, points scored, or leadership – these are not all there is to value a person.

Someday you will likely be celebrated on Father’s or Mother’s Day as anything but average or ordinary. Let your family and close friends be the measure of your greatness.

 

 

Getting a Jump on College

Hey Paul: I am starting my junior year of high school. I plan to take a couple of AP classes to earn college credit. What other ways can I get college credit from high school classes?

You’ll be busy with a couple of AP courses and the rest of your course load. Although AP courses and the associated tests receive the most attention there are a number of paths to college credit while in high school.

CLEP exams are similar to AP tests with many of the same subjects with a total of 33 tests. You don’t have to take a specific class to take a CLEP exam – potentially you could take the CLEP exam that matches up with one of your AP classes. If you are ambitious you could even combine a “regular” class with self-study and take the CLEP exam. The tests cost $80 that is slightly less expensive than an AP exam. I’ve heard they are a bit easier but don’t plan on an easy exam! See https://clep.collegeboard.org/ for more details.

One educational opportunity I highly recommend for any local high school student is to strongly consider enrolling in a free or highly discounted college course at Asbury University. Yes, that’s the college that I teach at but I don’t get any bonus money for touting “Asbury Academy”. The AU website describes the program as follows:

Asbury Academy is a dual enrollment program for high school juniors and seniors. This program provides opportunities for high school juniors and seniors to take general education requirements at the University level (100- and 200-level courses), enabling them to complete high school and earn University credit through dual enrollment.

What courses are offered? There are over 80 courses including Art, Biology, Communication, Greek, Psychology, and even horseback riding and weight lifting. I teach ECN 100 Survey of Economics and have had several Academy students in this class all of whom have done well.

What does it cost? Here is the good news. Seniors can take up to 4 hours of credit (most classes are 3 hours) tuition FREE! There may still be some course fees and certainly textbooks to buy but this is about $6000 of college tuition waived for one course in the fall and spring semesters. Juniors can take in-person classes but the cost is about $1500 per class.

Juniors and Seniors can take an online course for about $400 – about 80% off the sticker price. The online classes are fast paced courses that run over eight weeks. Online classes are not for everyone as you’ll need to hold yourself accountable to study independently although the courses are designed for interaction with the professor and your classmates.

What do I need to get accepted into the Academy? There are five components – a short online application, official high school transcript, official ACT or SAT scores, a recommendation from a high school counselor or other adult familiar with your academic ability, and written permission from one of your parents to participate in the Academy. The ACT scores are needed only if you wish to place into certain math or English courses. I don’t think too many students are denied admission to the Academy; the only quantitative requirement is that Juniors must have a 3.25 GPA and a Senior a 3.0 high school GPA. Most Academy students come for East or West Jessamine High but I have had home-schoolers and students from surrounding counties in my classes.

Do I need to be a Christian? As part of the application I believe you have to agree to abide by the Community Covenant that prohibits various vices and promotes virtues associated with Christianity. Surprisingly to some people, a student does not have to profess to be a Christian to attend Asbury University. Of course the vast majority of students who attend full-time are Christians but many of them came to Asbury with an inherited religion or perhaps no strong spiritual leanings.

What are the benefits of dual-enrollment? Many Academy students take their English or math requirement that doubles for high school and college credit. Unlike an AP course you won’t have to take a high-pressure comprehensive exam at the end of the school year. Also you will earn a letter grade for the course rather than just credit for passing. If you do not attend Asbury as an undergraduate you can still transfer the credit to virtually any other college.

One thing you’ll notice about college course is that there is less time spent in-class and more time expected to be spent out-of-class studying. Typically college courses meet three times a week for 50 minutes or twice for 75 minutes. The rule of thumb is that you should study about twice as much as class time. That brings the total time invested in a course up to about 10 hours a week.

What do you recommend? I think the benefits of exploring subjects that are not offered in high school and getting a feel for college are too good to pass up for anyone considering pursuing a college education. For starters I would definitely consider taking the two FREE courses as a senior. The half-off price for Juniors is still a bit pricey for most but I’d consider an online class for around $400 each semester. For around $800 in combined tuition you can have almost a semester of college credit. If you take 12 hours of dual enrollment credit and earn a 3.0 GPA you will earn a $1500 Academy Scholars scholarship equaling $6000 over four years of college.

Academy Contact Information

For questions regarding the Academy application process, please contact Kim Okesson at Kim.Okesson@Asbury.edu or (859) 858-3511, ext. 2506.

 

AP Classes Are Not for the Faint Hearted

 Hey Paul: I am beginning high school next year with plans to go on to college. How helpful will it be to take AP [Advanced Placement] courses in high school?

 There is a growing national trend and in particular a strong emphasis at West and East Jessamine High Schools in promoting AP coursework. My daughter just completed her junior year at WJ where she took five AP courses as did many of her friends. Guitar was her only “regular class” – I guess she won’t be ready for college level jam sessions.

In one word I would describe her daily schedule as brutal. English Language wasn’t too much work outside of class. Biology and US History were a significant amount of reading and watching videos. Calculus had daily homework. After sports practice and supper, she worked diligently from early evening often to midnight with usually a break to watch The Voice or a UK game. So the central question is does the tremendous time and energy investment in AP high school classes pay off in college and beyond?

StudyPoint, a national test prep and tutoring company, summarizes the benefits of AP classes as being challenged in high school classes to improve college admissions chances, win scholarships and arrive at college better prepared. Passing AP exams typically earns college credit that then can save money by completing college on time or even early.

While I don’t disagree with these potential benefits of AP coursework, it is entirely possible to get into a great college, receive a solid financial package, and graduate in four years without a single AP class! Yes, it helps to have a few AP classes and if you are aiming for Centre or Vandy then go ahead and take the full AP suite – although Vandy does not accept AP credit.

The AP course offerings vary slightly from year-to-year based on what teachers are willing and able to offer. The following list are the typical AP offerings at the local high schools with the national percentages of students scoring a perfect five, passing the exam (scoring 3+) and completely blowing the exam with a score of one:

% Scoring a 5 % Passing % Scoring a 1
Biology 6.6% 64.2% 8.7%
Calculus AB 24.6% 58.9% 30.5%
Calculus BC 48.4% 81.1% 13.6%
Chemistry 10.1% 52.8% 21.4%
English Lang. 9.6% 55.8% 14.1%
Envir. Science 8.3% 47.3% 27.2%
Physics B 15.8% 60.7% 22.3%
Psychology 18.7% 65.5% 20.9%
US History 11.0% 52.4% 19.6%
World History 6.6% 54.5% 17.7%

I didn’t include in the summary table the foreign languages tests that tended to have the highest pass rates (Chinese had a 95% pass rate). The College Board notes that a high majority of those doing well in the languages actually learned to speak the language at home not in a formal set of classes in school.   Many colleges will give credit for two or three college courses if you can pass a foreign language test.

Returning to the table we can see that Calculus BC is a cakewalk with almost half the test takers scoring a five and over 80% passing the exam. Well not quite a cakewalk. Not everyone is taking the same tests with the high IQ, over-achievers taking the tough math and science courses. This brings up the central critique of the benefits of AP courses – Is it the top students taking AP courses or are AP courses producing top students? In statistics jargon, are we seeing association or causation? – which, by the way, is a good response to any study when you want to sound sophisticated.

Note again that these scoring percentages are national averages. From what I hear some of the local AP classes are doing much better than the national average passing rates.   Let me give you my thoughts on a good approach to AP classes and high school coursework in general.

Freshmen at EJ and WJ can take AP Psychology – a class that fits in well with many college majors and is not overly technical. Although I have my misgivings about 14 year-olds taking a college equivalent class this is one worth a shot. From what I hear the pass rates are very good for the local freshies.

Freshman can also take AP Physics. As a Mechanical Engineering major I am all for studying the science of motion. The problem is that you need a good foundation in math (ideally Calculus) to study physics something that the vast majority of freshmen don’t have yet. Freshmen have no business in big-boy AP Physics.

The other sciences – Biology, Chemistry, and Environmental Science – are great classes if you have a curiosity about these areas of study and are thinking of pursuing a science-based career. My daughter happened to take Chemistry in the dreaded zero-block when high-schoolers are not awake even if their eyes are open. The pass rates on these AP tests are mixed.

The two major history classes – U.S. and World – are reading intensive. I would suggest if you are going to take either of these courses you get the book and read it the summer before classes. Yes, that’s the kind of dedication an AP class takes.

Calculus has the reputation in college as the most likely to be failed course. Calculus AB has the highest percentage (30.5%) of test-takers who bombed. Fortunately I am proud to report that WJ has two elite Calculus teachers – Mr. Barnes who I took Calculus from 30 years ago and Mrs. Peters who I was in high school with three decades back. The pass rates are very high for students in both AP Calculus tests.

So is giving up your evenings to study college level classes worth it? Let me suggest a balanced approach. Take at most two AP courses a year. Pre-study in the summer for the courses and focus on subjects that you’d actually enjoy reading! Say you knock out Psych, Environmental Science, U.S. History, & English Language. That’s a semester of college credit – Booyah!

 

Getting over College Sticker Price Shock

Hey Paul: Our high school son is looking at colleges in central Kentucky. He is a junior at WJHS. The Transylvania University website lists a “total cost” of $45,690 – about what we paid for our home a few decades ago! Your school, Asbury, posts total costs of around $35,000. How can college be worth these sky-high prices? What kind of “deal” can we expect?

When I attended UK about 25 years ago I believe the tuition was around $3000 a year and total cost around $6000. A student could combine relatively modest scholarships, financial aid, a summer job and a bit of help from parents and have no student loans. For this coming school year UK lists the total costs at $24,278! The magic of compounding growth is working against us. The typical annual increase of around 6% has doubled the costs every dozen years.

I have compiled some core information from four local colleges that may help clarify what you really are facing in terms of college “investment” (note the subtle change in wording from “cost”) as well as what a student can take from the college experience. This information is from the U.S. Dept. of Education’s College Scoreboard. See https://collegescorecard.ed.gov for complete information on these schools and any other colleges of interest.

Centre Transy Asbury UK
Family Income AVERAGE COST
$0-$30,000 $17,161 $15,256 $18,677 $9,743
$30,001-$48,000 $17,024 $16,435 $19,565 $11,831
$48,001-$75,000 $20,676 $19,470 $24,526 $15,416
$75,001-$110,000 $23,685 $23,085 $26,365 $17,779
$110,001+ $28,445 $25,716 $29,741 $18,220
Debt $26,063 $27,000 $26,000 $20,500
Starting Salary $45,000 $41,100 $34,100 $41,500
Graduation Rate 85% 73% 70% 60%
ACT Range 26-31 24-30 21-27 22-28

The first thing to note is that virtually no one pays “sticker price” – Even wealthy students that attend Transy get around $20,000 knocked off the sticker price. Your family’s income will be a major determinant of your financial aid package. For each of these four schools the lowest income students received about $10,000 more in financial aid.   Of course even the lower income student is looking at around 17 grand a year to attend a private college and around 10 grand to attend UK.

Keep in mind that these costs are averages – some students will receive more generous financial packages due to academic scholarships. Others will be eligible for further financial aid due to their specific financial situations. The College Scoreboard provides a link to each college’s Net Price Calculator that gives more precise estimates of potential financial aid packages.

Typically the “deal” includes the Kentucky Educational Excellence Scholarship (KEES), Kentucky State Grant and the college’s financial grants. Note that a grant is essentially a gift with no payback! The offer may also include Federal loans that like all other loans need to be paid back but often have no interest until six months after completing college.

The median student loan at the three private schools was around $26,000 – think about it like a car payment for the five years after college with a diploma in hand rather than a vehicle. Again that’s an average figure. I’ve known a few students with $100,000 in undergraduate debt and many with mid-five figure debts. That’s a heavy burden even before you start throwing in graduate school costs, a wedding, first home, and the first baby.

So, is it worth it? Yes, I think the college experience can be “the best four years of your life” and a springboard to a career that is not possible without a college degree. Over the years I know many college graduates that question the utility of their college degree but very few who would forgo college if they had to do it over again. On the other hand I know many people who regret they didn’t take advantage of continuing their education through college when they had the chance.

The one catch is that if you are going to invest tens of thousands of dollars a year than you better complete college – unless you are an NBA first-rounder. Half a degree is worth zilch. As I mentioned in last week’s column, college success is more about grit and wisdom than smarts.

Finances are important but don’t let money be the sole factor. The smaller classes and collegiality of a private college may be the difference between college success and dropping out.   Admission teams will work with you to “make it happen” and then the rest is up to you boy!

 

 

Is College for Everyone?

Hey Paul: I just graduated from East Jessamine. I was an ok student making mostly B’s. I didn’t take any AP classes. I haven’t decided what I want to do next in life. I’m thinking about working for a while and then maybe going to college. Do you think that is a good plan?

 You should join me at Asbury University this fall. Sorry, I’ll try to provide unbiased advice on this very important life decision. There is much I don’t know about your exact situation so some of my advice may or may not apply to your decision.

First let me congratulate you on earning a high school diploma. In doing so you’ve demonstrated a number of key life skills. You’ve avoided and perhaps overcome the educational derailers of trouble with the law or starting a family a little earlier than planned. You’ve been able to sit in a seat and listen for several hours each day – no small task and one that I didn’t do too well.

There are three general paths following high school – college, work, or the military. Of course there is a fourth path of living off your parent’s or the state’s generosity – but that’s not what we aiming for here.

Joining the Army, Navy, Air Force or Marines is not only patriotic but also a great way to build a career. My suggestion is to binge watch war movies ranging from Saving Private Ryan to Lone Survivor. If you end your movie marathon feeling called to serve your country then contact your local recruiter. My recommendation is that you go to college with the ROTC providing an introduction to military life as well as potentially covering your educational costs.

Taking a job after high school can literally buy you some time to figure out your next move. In some cases it may be necessary to have an income as you move on to living on your own or perhaps to afford paying for college. My observation has been that taking a year away from school can easily become a few years and then a permanent break from the classroom.

If you start a job I recommend at a minimum taking one course at JCTC in a subject that really interests you. Take a class that they didn’t offer in high school – auto technology, nursing, or marketing. Learn a practical skill and see if you have a natural flair for that type of work. This will keep you connected to formal learning that is essential for almost any career of choice.

What about college? Well despite what some say, college isn’t for everyone. Less than 20% of Kentuckians have a bachelor degree or higher. This statistic could suggest that only those in the top fifth of their high school class are solid prospects to go on to complete college. In your case I wouldn’t buy into the theory that because you were “average” in high school that you won’t be able to complete college.

I have been a professor at Asbury University for four years and before that taught a Marshall University – yes, as in the movie, We are Marshall! I’ve got to know hundreds of students that are probably much like you. They weren’t academic stars in high school but they made a decision, really a series of decision to make it through college.

Rev. Chuck Swindoll has a famous quote on how attitude and the choices we make are much more important than our circumstances:

“The longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, the education, the money, than circumstances, than failure, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. It will make or break a company… a church… a home. The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past… we cannot change the fact that people will act in a certain way. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude. I am convinced that life is 10% what happens to me and 90% of how I react to it. And so it is with you… we are in charge of our Attitudes.”

The “average” students who succeeded in college found a balance – finding a major they enjoyed while sticking out classes that seemed a waste of time, connecting with a core group of friends through FCA, the Greek system or other gatherings of like-minded people. They went to class – 15 hours a week isn’t too much to ask, is it? Being successful in college is more about being wise than being smart.

To many people going to college is about preparing for a career. A rule-of-thumb is that college graduates makes about twice what high school graduates earn over a lifetime. At the state level this rule holds as states like Colorado and Massachusetts that have roughly twice as many college grads as KY and correspondingly about double our income per capita.

The formula: college degree = money = happiness, doesn’t hold true for many college graduates. A cynic could modify the equation to college degree equals huge student loans working in a job that doesn’t require a college degree equals regret. Perhaps this cynic needs a poster size version of the Swindoll quote.  My college equation looks like:

Wisdom + Grit = College degree = Fulfilling Career & Personal Life.

Of course many people can substitute “Army”, “Working” or “Being a Mom” for “College” and end up with everything you could want out of life!

 

 

 

Side Hustles Usually Won’t Bring a Pink Caddy

Hey Paul: I am working out from under a fair amount of debt. My job covers current living expenses but not much to put towards paying down debt. I am looking into taking on a second part-time job and will devote the money to debt reduction. I am a single mother with two school age children. What suggestions do you have for side hustles?

I applaud your efforts to work your way out of debt. Usually people start by focusing on their spending habits and try to cut out the luxuries we too easily see as necessities. In some cases there are some obvious culprits – fast-food restaurants, the $5 latte habit, home-shopping-network “deals”, etc. But at some point we hit a hard limit on what we can or at least are willing to cut from our spending.

Assuming you’ve cut your spending to the core then boosting the income sources is the next option. The hope is that you can find a job that is fun, has flexible hours and you can make some good money. And, just for clarity sake, let’s assume legal. This job description matches various “direct sales opportunities” that may fit your needs.

Let me give you our brief experience with direct sales. My wife (with my somewhat hesitant blessing) has tried a couple of ventures – as a Mary Kay and “31” consultant. Startup costs are modest but not trivial and the potential sales commissions are huge. But you’ve got to find customers which is nontrivial.

My wife was always able to make some early sales and she always had one major buyer. Unfortunately from a business perspective that was also my wife. In the end she might have broke even with her commissions covering the “internal sales.” Probably the biggest lesson we took from these experiences is that despite the corporate promises, nothing sells itself. Be prepared to hustle and put in some serious hours to be the break-out sales woman in your niche. Who knows – maybe you’ll have a pink Cadillac in a few years!

I will add that I don’t like the idea of selling to “friends and family” things that are going to burst their budget. Part of the direct sales pitch is the social aspect of getting together with your girlfriends enjoying free samples and snacks. Ultimately you are providing an experience that brings people the opportunity to buy a good product from a friend. My dismissing of this advantage falls into the critique of economists knowing the price of everything and the value of nothing.

If direct sales is not looking like a good fit for you then taking a position “beneath you” may be a humbling but necessary step. You are a professional but you may have to deliver pizzas or clean homes to make that extra $10 to $15 an hour.   That’s not an easy path but it is a temporary arrangement that many people will respect you for including your kids.

 

Refinancing is Worth a Look

Hey Paul: What do you think will happen to mortgage rates this summer? We have a 30-year mortgage that we have 22 years left paying on. Our mortgage rate is 4.75%. Should we refinance our home?

 The refinance question comes up a lot and there are certainly plenty of blogs and mortgage calculator apps out there to help you answer your question. But like always, who do you trust? Well hopefully you can at least think about trusting what I have to say as I don’t have a skin in the game.

Let’s start with a few mortgage myths.

Myth #1: Mortgages are “good debt”. No, there is no such thing as good debt just as there is no such thing as a good cancer or good divorce. Yes, it’s better than credit card debt as you have a home as collateral and the rate is reasonable but a mortgage is a liability not an asset.

Myth #2: Since mortgage interest is deductible the rate is quite a bit lower than the stated rate. The simplest example of this is a 4% mortgage rate for someone in the 25% tax bracket. If they have enough other deductions such as state income taxes, property taxes and charitable giving to surpass the standard deduction than this myth has some validity. However most middle-income households do not get the full deduction impact from their mortgage as they simply don’t have enough other deductions.

Myth #3: It is always better to have a 15-year rather than 30-year mortgage if you can afford the higher payments. This actually has some truth to it as you’ll get about a 1% lower rate and obviously be freed up from mortgage debt in half the time. The fact is that you if (and this is a big if ) you can earn the same rate on investments as your mortgage rate then at the end of three decades you will have exactly the same wealth no matter what term you choose for your mortgage.

Myth #4: If you refinance you have to restart over at 30 years or fit into one of the standard length terms like 15 or 20 years. Not so. In your case you could go with a 15-year mortgage but the payments may be more than you can comfortably handle. An alternative is to go with a 30-year mortgage but immediately pay down the balance to leave only 22 years remaining while keeping the monthly payment at the scheduled rate. Another method is to pay extra each month to pay down the balance faster. The lender can tell you this amount – or I’ll calculate it for you.

Is this the lowest rate we can expect or will they drop even lower in the next few months? My hunch (and keep in mind the track record of economists making predictions) is that right now is as good as it will get. I’m surprised rates have hung around this long at historic lows.

For your 4.75% mortgage you can expect to knock about a percentage point off your rate with a new 30-year mortgage. A 15-year mortgage rate is almost 2% points lower – if the finances (and wife) are alright with it consider chopping seven years off the housing debt schedule. Of course the best rates are for those with excellent credit and the income capacity. If your credit or earnings have taken a hit since your original mortgage then you may not be able to lower your rate with refinancing.

There are at least a couple local lenders who have very reasonable refinancing costs. Suppose your closing costs (e.g. appraisal, title work, etc.) are only $500. This probably means the bank is eating some of the costs. If you have a $150,000 mortgage balance then a 1% rate saving will roughly save you $1500 of interest expense in the first year. So in about four months you have recouped your refinancing costs and your mortgage will be about $90 less per month.

Any local bank can provide you with a good faith estimate of the costs. If you have any “special circumstances” then working with a local lender is usually beneficial. If you don’t mind dealing online then go through BankRate.com or Zillow.com to search for the best deals nationally. I wish the best in your mortgage journey.

Dr. Paul Hamilton is an Associate Professor of Economics at Asbury University and a CFP providing fee-only financial advice. He is available to provide free workshops to churches, local businesses and other groups.

 Contact him at Paul.Hamilton@Asbury.edu or www.USA-Economics.com

 

 

Seven Quick Money Fixes

Hey Paul: What are some of the easiest (and free) ways to improve our financial picture?

 I like your approach to tackling what may be big financial challenges by starting with the quick, simple and free actions. These small steps can in some cases solve or ward off much bigger problems. So without further ado here are some quick fixes.

Start by Filtering out the Noise. Do you get inundated each and every day with junkmail, spam emails, robo sales calls, and credit card applications? To reduce junkmail go to www.dmaconsumer.org I also suggest setting up a token email account like My.Name.Junk@gmail.com to use for those one time signups requiring an email address. To opt out of credit card and debt relief solicitations go to www.optoutpresecreen.com/. To sign up for Do Not Call register at www.donotcall.gov. These won’t cut off all unwelcome marketing but it will dampen the noise allowing you to better hear the signals.

Money can only go one of three places – spent, saved or taxed. There are several popular, free apps such as Mint and Personal Capital that can track your spending and net worth. There is about 1 in a 1000 people that can manually keep a budget. Today’s technology takes over most of the legwork – if you are willing to trust access to your finances to the cloud.

A Big tax refund could have helped earlier. Suppose that just this week you got a check from the U.S. Treasury for $1000 – Myrtle Beach vacation or new couch? But suppose you’ve got some really nasty credit card debt sitting at 29.99% for over a year. If you had an extra $85 a month in your paycheck rather than giving the IRS an interest-free loan, you are paying down debt in this case saving roughly $300 in interest. You can adjust your withholdings at any time by filing an updated W4. Unfortunately the W4 doesn’t let you directly select the dollar amount of tax withholdings. The IRS and tax preparers have online calculators that can do this calculation for you. See http://www.hrblock.com/get-answers/w-4-calculator.html.

Doubling your money happens much more often through your employer’s retirement matching plan than at Keeneland. Not everyone works for an employer who will match their retirement contributions. Typically the employer matches your contribution up to say 3% of your earnings. There are variations in the plans such as vesting over a few years and the level of matching. I realize that some budgets are so tight that devoting even $100 a month to retirement may seem impossible. But if you can find that money by taking on that side hustle job or trimming back the entertainment or restaurant tabs, you will have effectively doubled your money with each retirement contribution.

Cash transactions remind us how long it took to earn that money. The convenience of credit cards or even debit cards or writing a check blur our wants and our ability to afford those toys. You don’t need to use cash for fixed transactions like your mortgage or utilities. Start by paying cash for the budget busters – restaurants and clothes.

Credit, Loans, Mortgages, or Capital are just nice names for Debt. I suggest cutting (literally) back to at most three credit cards. Preferably you primarily use a debit card that draws on your bank checking account. To see all your debt related accounts request your free credit report at www.annualcreditreport.com. It’s also good to know your credit score that can be purchased for less than $10 or is offered free with many credit cards.

Do you have an exit strategy in place?   Every adult needs a will. I have used the Nolo.com online software to create my will and a living trust. A living trust typically keeps your estate out of probate saving your heirs about 5% of the assets – maybe ask them to spring for the money to put a trust in place. There are a few different health related documents that are simple to complete (other than the contemplation of the scenarios when these would become effective) such as a living will and health and financial power of attorney.

Challenge yourself by completing one of these tasks today!

Dr. Paul Hamilton is an Associate Professor of Economics at Asbury University and a CFP providing financial coaching to middle-class Americans. He is available to provide free workshops to churches, local businesses and other groups.

Contact him at Paul.Hamilton@Asbury.edu or www.USA-Economics.com

 

Try Not to be Valedictorian

Hey Paul: I currently in middle-school taking the top classes. My goal is to have straight A’s in high school. Any advice?

 I am glad to hear from another young person. Last week’s column was my first that deviated from “only the serious stuff grown-ups think about” like taxes and social security. In fact this week I met for the first time a reader of my column under the age of 20 – a shout out to Meredith, my new favorite of my daughter’s friends.

I’ll probably not the ideal person to be asking this question – my two sisters were straight A students from kindergarten through college and my brother a 4.0 Civil Engineering student at UK. My goal in high school was to be the top GPA for those who didn’t study – something I think I accomplished although I’m not sure if this a distinction to be proud.

So here is my advice – don’t try to be valedictorian. Sure, work diligently and earn good grades. I have encouraged my three high-achieving daughters to try to get a B in at least one class. There’s a couple of reasons behind my “B’s are not bad advice”. First, you should focus on learning not grades. Second, you will put immense pressure on yourself (or perhaps your parents will) to maintain that perfect 4.0. And third, you will live life conservatively not taking the challenging, risky path that is fraught with failure.

Let me ask you this – what’s your best dive off the board? Head-first, no spring? A pencil? C’mon give me a break. That’s way too safe. When the Jessamine pool opens next month you are going to run down the board, take a deep bounce, and do as many flips as you can before splatting into the water. Why? Because an ugly flip trumps a perfect pencil dive any day.

Hey Paul: I am seeing a lot of ads claiming that Social Security rules are changing this month and that there are strategies to increase our benefits by up to $50,000. Can you explain what this is all about?

 Well like most ads there is some truth and some hyperbole in these claims. First the truth – Yes, the Social Security Administration is changing a few policies on how benefits are paid. The only immediate concern is the changes to what is called the “file-and-suspend” strategy. The option to “get a better deal” ends after Friday, April 29.

The simplest story is a couple, both age 66, where one spouse is a high earner (say the husband but gender is not relevant for how this works) and the other spouse was a low earner. Suppose the husband and wife are entitled to their own social security annual benefits of $20K and $5K, respectively. They could both start their benefits with the husband receiving $20K and the wife receiving spousal benefits of $10K – half her husband’s benefit which is greater than her own benefit of $5K.

The file-and-suspend strategy has the husband filing for benefits and then immediately suspending (stopping) his benefits. This has two purposes – by filing he makes his wife eligible to begin spousal benefits of $10K. By suspending he allows his own benefits to grow by 8% annually once he restarts his benefits. In four years his $20,000 of forgone annual benefits will have grown by 32% to $26,400 when he restarts benefits at age 70.

The BIG social security law change is that while a spouse can still file and suspend, when they suspend this stops ALL benefits based on that person’s earnings record. For the case described above if the husband suspends his own benefits then the wife is no longer eligible to receive spousal benefits. She could file for her own benefits of $5000 at age 66. The monetary damage in this case is $5K each year (the difference between her spousal and own benefits) and a total reduction of $20,000 from age 66 to 70. This loss would have equaled $40,000 if the wife had less than 10 years of earnings and was entirely dependent on the spousal benefit.

Under the new laws could the husband go ahead and start his own benefits of $20K at age 66 and the wife draw spousal benefits of $10K? Yes! This strategy is very appealing as the couple would be up by $80K at age 70 compared to the file-and-suspend strategy. The downside to this go-for-it strategy is that eventually the file-and-suspend strategy will catch up and surpass the cumulative benefits. If one or both live into their early 80’s or older then the file-and-suspend strategy would have been preferred.

To take advantage of the perk of being able to suspend your own benefit and not impact a spouse’s benefit you need to meet three criteria. One, be between the ages of 66 and 70 on April 30th. Two, have a spouse (or minor child or adult disabled child) whose social security benefit is based on your earnings up to you turning 70. Three, have a desire to maximize your own social security by starting benefits at age 70. Many people meet the first two criteria but only a few percentage of people wait until age 70 to start social security benefits.

So if you are one of those rare birds that meets all the criteria to benefit from filing and suspending your benefits, you have only about a week to lock in that strategy. Feel free to contact me for a quick consultation if you are truly perplexed on how to proceed with Social Security benefits.

Dr. Paul Hamilton is an Associate Professor of Economics at Asbury University and a CFP providing financial coaching to middle-class Americans. He is available to provide free workshops to churches, local businesses and other groups.

 Contact him at Paul.Hamilton@Asbury.edu or www.USA-Economics.com