Paying for College Part 1

Make one of the most important steps in life a little easier on yourself

Saving for college. Those three words inspire fear in the hearts of parents across the nation. Endless debt. Birds flying the nest. Kids living on their own for the first time since….well, ever!

Choosing the Right College

Saving for college doesn’t have to be a nightmare. There are options for families who want to put money away specifically for their child’s education so they don’t have to graduate facing mountains of student loans. No matter your financial situation, hopeful families must calculate how much money they will need when their child reaches college age. Families will have to consider how many kids they want to send to college, what type of profession the student wants to pursue, and what type of colleges meet those needs.

Your cost of college depends on the type of college you choose. Here are a couple quick tips on choosing the right college:

1. Discuss what type of study your child wants to pursue. Ensure that the schools your apply to provide those types of programs, and are strong in those programs.
2. You can save a lot of money by going to a community college or public two-year college, then transition to a four year college or university. Classes are a bit easier, and most transfer most if not all of their credits to four-year universities. 
3. If your child is showing desire to pursue a profession that requires graduate school, make sure you factor in those costs and requirements into your preparation.  

Paying for College

Some families may choose to pay for their child’s entire college education, while some students take on the entire amount of the loan. More commonly, a combination of parental payment, student payment, student loans, as well as scholarship all contribute to making college happen for Americans across the country.   

In this article, I will talk about saving investment instruments, as well as factors to consider in your college planning and loan repayment. 

Saving Instruments 

529 Savings Plan

(According to SavingforCollege.com)


A 529 Plan is an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. It is named after Section 529 of the Internal Revenue Code which created these types of savings plans in 1996.

Which states offer 529 plans?

Nearly every state now has at least one 529 plan available. It's up to each state to decide whether it will offer a 529 plan (possibly more than one) and what it will look like, meaning 529 plans can differ from state to state. You should research the features and benefits of your plan before you invest, research state 529 plans and even compare between plans.

Tax Benefits

As long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to you, the plan participant. See the top 7 benefits of 529 plans.

Some states (but not all) offer tax incentives to investors as well. Research your state's tax treatment.

NOTE:

Hawaii does not allow you to take a state tax deduction on your contributions to the plan. 

Types of 529 plans

529 plans are usually categorized as either prepaid or savings plans.

Savings Plans work much like a 401K or IRA by investing your contributions in mutual funds or similar investments. The plan will offer you several investment options from which to choose. Your account will go up or down in value based on the performance of the particular option you select. You can see how each 529 plan's investment options are performing by reviewing our quarterly 529 plan performance rankings. [updated date 05/2015]

Prepaid Plans let you pre-pay all or part of the costs of an in-state public college education. They may also be converted for use at private and out-of-state colleges. The Private College 529 Plan is a separate prepaid plan for private colleges.

Educational institutions can offer a 529 prepaid plan but not a 529 savings plan (the Private College 529 Plan is the only institution-sponsored 529 plan thus far).

Enrolling in a 529 plan

There are two ways to invest in a 529 plan.

1. Directly with the 529 Plan manager. See a list of 529 plans.
2. Through a financial advisor. Find an advisor in our Pro Directory.

NEXT TIME......

Pay Down Your Student Debt!

Back to Basics : Why Do I Need Life Insurance Pt. 1

Have you ever heard your parents talk about life insurance before? Have you ever wondered what life insurance is, or why you need it?

Before I started college, I had no real idea what insurance was. I knew that people in retail stores tried to sell you warranties to protect your high priced items from being damaged. But life insurance is very different and unique in its own way.

In this first post, I am going to speak on the following:

• What is insurance
• Why do we need Insurance

Next Time I Will Cover:

• Term Life Insurance

Life Insurance is very important for those with dependents with bills to pay

What is Life Insurance?

 According to Fidelity, a life insurance policy is a contract with an insurance company. In exchange for premiums (payments), the insurance company provides a lump-sum payment, known as a death benefit, to beneficiaries in the event of the insurer's death.

There are many types of life insurance, but the first two I want to cover are the most common; Term Life Insurance and Whole Life Insurance.

 Term life insurance generally provides protection for a set period of time, while permanent insurance, such as whole and universal life, provides lifetime coverage. It's important to note that death benefits from all types of life insurance are generally income tax-free

Comparing Types of Life Insurance

	Term Life Insurance	Universal Life Insurance	Whole Life Insurance
Needs it helps meet	Income replacement in a lump sum	Wealth transfer, income protection and some designs focus on tax-deferred wealth accumulation	Wealth transfer preservation and tax-deferred wealth accumulation
Protection period	Designed for a specific period (usually a number of years)	Flexible; generally, for a lifetime	For a lifetime
Cost differences	Typically less expensive than permanent	Generally more expensive than term	Generally more expensive than term
Premiums	Typically fixed	Flexible	Typically fixed
Proceeds paid to beneficiaries	Yes, generally income tax-free	Yes, generally income tax-free	Yes, generally income tax-free
Investment options	No	No2	No
May help build equity	No	Yes	Yes
Available through Fidelity	Yes, Fidelity Term Life Insurance3	Yes, Universal Life Insurance, primarily focused on death benefit protection	Not currently offered

Why Do We Need Life Insurance?

 Imagine a world where you have a spouse, two kids, with a house and car to pay for. One second you're living life, next second BAM. Your spouse passes away from a car accident. Now what?

Not only are you emotionally distressed, but now your family now has half as much money to pay for the same mortgage, car, and living expenses. Not to mention the funeral expenses and other personal liabilities that the deceased person might have had. Without sufficient savings, your family may be forced to sell their car, or move out of their home. Their entire lifestyle could change.

Now lets go back to the same situation, but lets pretend that this family was protected under a life insurance plan. By working with an agent, the family calculated how much money they would need to pay for the necessary expenses in the case of a death of a breadwinner. The insurance company was able to get the family the funds they needed within a week after the death. While the death benefit couldn’t pay for all of their expenses, the family was able to pay off their house and funeral expenses. The spouse was able to keep the house, and the family was able to keep the rest of its life intact.

Whole Life Insurance serves a six key purposes, according to Forbes and Northwestern Mutual

Here is the link if you want to check out their site

Protect you and your family from the worst so you can live your best

1.       Access to Cash (Whole Life Only)

Whole Life policies accumulated cash over time. The cash value is accessible through policy loans or withdrawals for business opportunities, education funding, retirement income, emergencies, or to pay policy premiums.  

Translation: Whole Life policies build money at a guaranteed rate set by the insurance company. This money builds over time, at a very, very slow rate. You are not going to be impressed by the returns, but the key here is that it is guaranteed by the insurance company.

2.       Asset Protection (Term and Whole Life)

Life insurance can offer a financial fall-back when needed and offset the impact of estate taxes upon your death. The death benefit also can provide surviving family members with funds they need to live comfortably and help achieve their goals.

Translation: When you die, your family is left to pay the bills. Funerals cost anywhere from $3,000 - $20,000. Transfer of assets (think cash) often takes time to process. If your family is unprepared, your savings can be wiped out from an unexpected passing. Or you might not have any money to pay for the costs. Life insurance makes sure your family remains financially stable during a time where they are emotionally unstable, and unable to make good decisions.

3.       Consistent Safe Accumulation (Whole Life Only)

Permanent life insurance cash values are guaranteed, meaning you will always have access to the assets you accumulate.

Translation: Whole Life Insurance is a low risk product for people who want safe, guaranteed money. If you have a low risk tolerance, whole life may be an option for you to accumulated assets. Again, the growth is very slow.

4.       Flexibility with Less Restriction (Whole Life Only)

You can access your accumulated cash value without restrictions that exist on other assets. For example, there are no penalties or required minimum distributions, unlike other tax-favored investments such as IRAs and 401(k) plans.

Translation: Whole Life Insurance has more flexibility that other retirement accounts. There are few other retirement accounts that offer the same tax advantages at the level of flexibility.

5.       Long Term Financial Security for You and Yours Family (Whole Life Only)

Once you have built cash value over decades, you have multiple options for accessing those funds. You can cash in the policy, convert it to an annuity for guaranteed lifetime income, keep a portion of the death benefit and access some of the cash value, or continue the policy to protect your family and leave a legacy.

Translation: Whole Life is just like wine; It gets better with age. The rate of return on the cash value portion increases each year. If you want to transfer wealth with a tax advantage and leave something for your family, you might want to consider Whole Life.

6.       Protected Insurability (Whole Life Only)

As long as premiums are paid, permanent life insurance provides coverage throughout your life, even if health or personal situations change. And buying a policy at a young age locks in insurability.

Translation: Whole life lives up to its name. It is truly meant to be a permanent insurance policy with its protection and cash Value.

This list in in no way complete, but simply the benefits that I would like to point out.

What is Term Life Insurance?

                Term life insurance of the most affordable coverage. We will talk more about Term Insurance next time…..

Just In Case of Emergency

Problem: How much should I save in case of an emergency?

                Emergencies, just like life, are unpredictable.  When someone loses a job, has an accident, or comes across a surprise car repair, their cash flow can be devastated; if you are not prepared.

I hope you have a wad of $100’s saved somewhere!

We can never fully avoid emergency situations, but we can protect ourselves from them to a certain extend by saving in an emergency fund. Don’t know what an emergency fund is? Read on, brave reader. Already know what an emergency fund is? Read on anyway, because you can never be too careful.

What is an emergency fund?

An emergency fund is a separate savings or checking account used to offset the cost of an unforeseen situation. The main distinction between an emergency fund and a normal savings account is that you do not count the emergency fund to your nest egg or long term savings. Why? The only time you will tap into your emergency account is in a time of financial crisis. You will not tap into it unless you absolutely need to, otherwise it just sits there and acts as a shield.

Emergency funds are essential for on the job injuries

How Much Should I Save?

In the Financial Planning world, the rule of thumb is the have 3-6 months of expenses saved up as an emergency fund. While this will vary based upon your type of lifestyle and job stability. This may seem like a lot of money to save up and not touch, and it is. But that is what it takes to protect you and your family. Missing a couple months of rent could have you living on the street if you do not have the savings to cover the cost of living after you get injured or leave your job. Here at the steps I would take:

1.       Figure out how much you spend per month

2.       Project it out to 3-6 months.

3.       Save 5% of your bi-weekly pay and put it away

Where Should I Save It?

Emergency savings should be placed in a stable account where you can access the money quickly and easily in times of crisis. I would recommend an interest earning bank account, either a money market or interest bearing savings account that can be accessed without penalties

You should NOT save your emergency fund in a stock or investment portfolio. These types of instruments might actually put you at greater risk because they might lose value when you need the funds the most. These assets are not as liquid compared to a savings account, which could delay you getting the funds you need.  

When do I Spend the $$?

                The purpose of an emergency fund is to pay for expenses related to an unexpected hardship. Once you realize how many dollars you need saved up to cover 3-6 months’ worth of expense, you will know how much you have to maintain in order to continue to protect yourself. If an emergency does come up and you end up tapping into your fund, great! Just make sure you immediately begin to restore your funds as soon as possible.

                 

Why it is my Dream to Become a Financial Planner

Hey everyone,

      I know I haven't been paying much attention to my blog: life, running my own business, school, friends has got me on the ropes. But like the great Ali, I'm bouncing back!

     This is a story about how money and finance affected me during my childhood, and how those experiences shaped me to who I am today. I hope this will give both my clients and general observers a look into my life, to see what kind of person I am, and see if I am the right fit for you as professional.

How It All Began

     My finance career today got started when I was three years old. My parents took me to the Daiei, the old local shopping mart in Pearl City Shopping Center. During our shopping, I soon realized how expensive certain items were. So my first thought was, how can I help my family save money?

     So I started collecting coupons wherever I could find them. I went to each dispenser for the things we would buy and carefully read every coupon, without my parents knowing. M parents time was too valuable to bother messing around with coupons. But I believed that I would make a difference in this little shopping trip. I would present the coupons to my parents when we were in the checkout line. In my first day, I had saved $5.23. That meant I got to buy a bag of M&M's and still have money left over! At that point in my life, I learned that cutting costs is the first step to being a smart consumer.

When you're not making money, you have to cut costs to save!

     And so I became a saver. I was a very frugal spender wherever I went, and always choose the most reasonable options when eat out with my family, I always choose water over spending money for soda(its a much healthier choice, anyway), I always got the same cheap Chicken Teriyaki plate every time (you cant beat 7$ for a plate!), and that is how I learned how to live by modest means. It truly is a skill that must be developed over time.

    Although I was saving my parents money, I never got to keep any for myself. "This sucks!" I thought. I believed that I deserved some of the money that I was generating through saving. I wanted to buy things that I wanted.  There was one day of my life that turned me from a bare bone saver, to someone who wanted to use my knowledge of finance to provide a comfortable lifestyle to myself and my family and friends.

I Want My Friends and Family to be Financially FREE

     Another day, another trip to the Navy Exchange. I was with my parents and my grandma, and my grandma loved to spoil her grandchildren. There was a Gameboy Advance game called "Advanced Wars" and oh I wanted it so bad. I begged my mom, but she held strong. This is the time where a smart kid will turn to grandma, soften your face, and beg with everything you got. My grandma asked me, "Travis, do you really need this new game. Do you need it?" I really thought about it. "No, I dont need it" I admitted, with a big exhale. Just because you can buy something, doesn't mean you have to. It was then my grandma told me her story of growing up...

    My grandma Mendoza grew up in a poor town in the Philippines where people do not enjoy the things that you and I take for granted. I remember when I took a trip to visit my family in the Phillipines, I saw my grandma boiling water in a pot. I thought, great, were having ramen! When I went to take my pre-dinner bath, I noticed there was not knob for hot water. I called "Grandma, how do I turn on the hot water?" Before I knew it, she had the pot of hot water in her hands, and she said, "Why my dear, I have the hot water right here!"

The memories are fond to me now, but it was at this point I realized my grandmother had to live by modest means. My family really had to fight for everything they have, and I think that spirit is in me . As American's we earned our freedom by fighting the British in the Revolutionary War. As a financial planner, I want to give you and your family a chance to fight for your financial freedom. We have to make sound decisions based on information that we glean from the world around us. All this information about finance, retirement planning, tax planning, insurance, and banking would be a huge burden for even our most savvy citizens. I want to be a person that will educate you in the ever changing environment of today, to give you financial freedom, so that you never have to end up boiling your own water like my family had to.

The Day I Learned to Generate My Own Wealth

Now back to my predicament. The game was $30, for an 9 year old boy with no allowance, I would have to wait until the next birthday or Christmas to even think about having that kind of cash. So I did what any aspiring entrepreneur would do: I found a way to make the cash:

Just like any kid, I found extra chores to do around the house. This gave me a great work ethic, and taught me that if I worked hard, I could  earn what I wanted. I began to monitor my cash flows and record accounts of cash I put in my piggy bank, I learned the value of saving money, and also had to learn how to sacrifice certain things like snacks after school. I learned how to make smart choices financially. I save up, bought my game, and boy did it feel good to buy it by myself. I wondered, what else do I want?

Look How Far We Have Come, and Where I Want to Go!

Now as a college student, I pay for my school, my dorm, my car and phone, basically anything that I do, I support with my own money I am very content and comfortable with where I am, and I want to help other people find their financial footing so they can confidently and comfortably live out their lives.

What I think sets me apart from other advisers is not just my ability to get things done, but also the challenges I have faced in life and the experienced I have gained dealing with them.

 Financial planning is not just for those of us with a significant nest egg. On the contrary, families who are facing financial hardships due to a lack of cash inflow and assets are the people who have a special place in my heart. Just like my grandma endured through her hard times, I want to help give you the spirit and tools you need in order to achieve your financial FREEDOM.

The reason I do financial planning is simple: I want to help people who want a better life for themselves and their families. No matter if you have over $1,000,000 in assets or as little as $100 in your checking account, I want to be someone you can turn to when you need it most. Follow me on my journey, as I prepare to enter the professional world as an audit accountant in Honolulu, Hawaii, and work towards getting my CPA and CFP!

You can check me out at:

Facebook

Instagram

Oh, and I also do private sports coaching! If you want to find out how you can sign up your athlete with a college student athlete mentor, check out VarsityPrep!

Credit Card Debt: Get Out From Under!

     Hey everyone, Travis here. Its another warm and humid day in Hawaii, and in this sweltering heat has got me feeling like I cant breathe. But while I only have to worry about the heat and bringing and extra shirt to work, I know some of you may be feeling like this lady instead:

     Yes, sweltering under the oppression of credit card debt. We have all been through it at some point in our lives, and if not yet, you will soon find out. Maybe it was from a shopping spree that just went a little too far, or maybe you forgot your cash at home when making a big purchase. Either way, its not as hard as you think to get dragged into debt

 According to NerdWallet.com, in this is what the average consumer debt looks like in 2015:

U.S. household consumer debt profile:

• Average credit card debt: $15,863
• Average mortgage debt: $156,584
• Average student loan debt: $33,090

Now think, how much credit card debt do you currently hold?

What is the Cause of All This Debt?

Today, more American's than ever are choosing to go with plastic, rather than paper. Paying with a card is just so quick, easy, and convenient. But it is the underlying dangers of paying with card that can trap you in over $15,000 of debt.  When we spend with plastic we don't physically feel our cash been used. We just swipe and don't think twice. Just because Rae Sremmurd doesn't check the price, doesn't mean you shouldn't either! 

Eventually, you begin to lose track of how much you spend. Then when you receive your credit card bill at the end of the month, and you cant believe your eyes

I am going to give you THREE ways to help bring down your credit card debt, and get your spending habits into control 

1) Set aside the amount of cash you want to spend for the day or the week, and leave your plastic at home. 

    Spending money in cash is the first step to curb your debt. If you are already in debt, you cant risk yourself getting deeper into debt. So leave your credit card at home next time you go out. Get this; credit cards have an interest rate of 15% and higher! This means you actually lose more money the longer your debt goes unpaid.

      Studies have shown that people are able to curb their spending when they spend in cash because they realize how much they spend. Don't be a bum just because you got happy with the plastic!

2) Cut the Frivilous spending you do and focus on the necessitiesf

Cut the extra stuff you have been spending your money on: eating our, buying drinks, or going to the movies. Cook food at home instead of buying lunch at work. Take the bus instead of spending money on gas and parking. Drink water instead of buying boba or Starbucks. Every dollar goes a long way to helping you pay down your debt.

3) Set a strict budget for you spending, and set aside a portion of the leftover money to pay down your credit card bills 

 Set aside your budget for the week, and set that as your absolute limit. For example, if you have a paycheck of $500 every two weeks, set aside the amount of money you need for necessities, and also set aside an amount to pay for your credit card balance. Planning will help you realize how much you actually need to get through the week.  Being disciplined is key here. If you take just enough cash budgeted for your day and leave your credit card at home, you'll be safe knowing you won't be able to spend.

Thanks for reading with me. The first step to financial freedom is getting the debt monkey off your back. If you have an questions or would like to know more about the how to pay your credit card debt, contact me at tganiko@hawaii.edu. 

Travis Ganiko

Financial Planning for Aspiring Athletes and Their Families

Dear families and young athletes of Hawaii,

Aloha, my name is Travis Ganiko, I am an aspiring CFP and CPA, living in Pearl City, Hawaii. I am also co-founder of VarsityPrep, a local sports development organization from the University of Hawaii. In VarsityPrep, our main mission is to utilize college students in local campuses to help foster positive growth in the local sporting communities. We want to show kids in Hawaii that the opportunity to play sports in  high school and even college is within their grasp. All they need to do is commit themselves wholly and fully to accomplishing that dream.

Not only must the child commit to this vision, but the family unit as a whole must also commit in order to give the child the best possible chance to be successful. Dedicating a life to sports is a significant challenge to families who do not have the resources or time to sacrifice. As a specialist in financial planning, I want to turn my knowledge into a resources for the families of Hawaii who want their children to have a better life than their parents had growing up.

I am dedicating my services to help families in these areas:

• Personal Finance
• Insurance Planning
• College Financing
• Saving for College and other long term goals
• NCAA eligibility requirements 
• Sports training networking