May 16, 2007
Synergy Financial Group
George Van Dyke
401 Washington Ave #703 Paying for Graduate School
Towson, MD 21204
410-825-3200 Paying for graduate Scholarships and grants
410-530-2500 (cell) school can be a
[email protected] challenge. While the Most scholarship and grant aid at the gradu-
www.synergyfinancialgrp.com
bank of Mom and ate level comes from the school itself. How-
Dad may have ever, this aid is often awarded on the basis of
helped fund an un- merit rather than need. To investigate, contact
dergraduate educa- the school's financial aid office. Many scholar-
The purpose of this newsletter is to
give you interesting tidbits of tion, students con- ships and grants (like teaching fellowships or
information that you may find of sidering graduate school are more likely to be research grants) are awarded at the depart-
interest. The hope is that some of
on their own financially. Here are some sug- mental level, so your chances might depend
what you read here will spur you to
take action, help you to simplify gestions on where to look for financial help. on what subject area you'll be studying.
some aspect of your financial life,
or help you to avoid a future pitfall!
Loans, loans, loans Employer educational assistance
Alert: Some companies offer tuition reimbursement,
According to the College Board, the average
REAL ESTATE FALLOUT - 13% of
graduate student funds 69% of his or her edu- which can be a great source of "free money."
adjustable rate mortgages taken
out during the last 3 calendar years cation costs with loans. Would-be students But there are often strings attached, like main-
(2004-06) are projected to
can borrow from private lenders or the federal taining a certain grade point average or stay-
ultimately end in foreclosure
(source: First American CoreLogic, government. Uncle Sam's three major loan ing with the company for a number of years.
Wall Street Journal). programs--all available to graduate students-- The first $5,250 of employer-provided tuition
BIGGER THAN MOST - To rank in are the subsidized and unsubsidized Stafford benefits is exempt from federal income tax.
the top 1% of American loan, the subsidized Perkins loan, and the
households based upon net worth Education tax benefits
(including the value of a family's unsubsidized PLUS loan. "Subsidized" means
primary residence) requires a net the government pays the accruing interest Three federal education tax benefits might
worth of $6 million or more (source:
Federal Reserve, WSJ) during school and deferment (loan postpone- help defray your expenses in 2007:
ment) periods; such loans are only available The Lifetime Learning credit is worth up to
to students who demonstrate financial need. $2,000 for tuition and fees. To qualify, your
In 2007, graduate students may be eligible to income must be below $57,000 (single) or
borrow up to $8,500 in subsidized Stafford $114,000 (married filing jointly).
loans, up to $12,000 in unsubsidized Stafford The deduction for qualified higher education
In this issue:
loans, and up to $6,000 in Perkins loans. expenses lets you deduct $4,000 for tuition
Paying for Graduate School Currently, the interest rate on new Stafford and fees if your income is below $65,000
loans is fixed at 6.8% and 5% for Perkins (single) or $130,000 (married filing jointly). If
Don't Let This Year's Family loans. And under the PLUS loan program,
Vacation Wreck Your Budget your income is more than that but less than
graduate students can borrow up to the full $80,000 (single) or $160,000 (married filing
Modifying a Home for cost of their education (minus any other finan- jointly), you can deduct $2,000. This deduc-
Independent Living cial aid received) at a current fixed interest tion is only available for 2007, and it can't be
Ask the Experts rate of 8.5%. To be eligible for federal student taken in the same year as the Lifetime credit.
loans, you must be attending graduate school
on at least a half-time basis. Then you must The student loan interest deduction lets you
file the government's aid application, called deduct up to $2,500 of student loan interest
the Free Application for Federal Student Aid. each year. To qualify, your income must be
You can file it online at www.fafsa.ed.gov. below $70,000 (single) or $140,000 (married
filing jointly).
Students can also obtain loans from banks or
other private lenders, though such loans typi- For more information, see IRS Publication
cally carry higher, variable rates of interest. 970, Tax Benefits for Education.
Page 2
Don't Let This Year's Family Vacation Wreck Your Budget
With today's • Let older kids pick an activity. It might not
busy lifestyles, be Disney World®, but what about a trip to
many people an amusement or water park, a day or
view a nice two at the beach, an afternoon canoeing
family vacation or fishing, a movie and dinner outing, or a
every year as ballgame? Instead of lamenting the fact
an entitlement, that you can't take an exotic vacation,
even if it means focus on what you can do and enjoy the
going into debt to pay for it. They rationalize time with your family.
that they work hard all year and deserve it, or
they become wistful after hearing about the • Consider house swapping. If you're will-
fancy vacation plans of friends, co-workers, or ing to trade houses with other like-minded
neighbors. Sure, everyone needs a break, families to save on room-and-board
and parents naturally want their kids to have costs, there are several websites where
fond memories of endless summer days spent you can find more information.
romping on the beach, but how can you pre- Plan now for next year (or the year after)
vent your vacation costs from spiraling out of
control? It's never too early to start thinking about next
year, or the year after that. Start saving now
Can you really afford it? for that future getaway by making a budget
First, assess honestly whether you can afford and seeing where you might be able to
the vacation you're thinking about. If you have squeeze a few dollars. Then consider opening
to borrow most of the money to pay for it, then a separate vacation account for those funds;
you probably can't afford it. If you do borrow to otherwise, the money may get "lost" in your
pay for your trip, you might find yourself finan- regular savings account and used for other
cially strapped later on if the roof starts leak- purposes. Where you put your money will
ing or one of the kids needs braces. At the depend on your time horizon and other fac-
very least, you'll inherit the stress that comes tors. A financial professional can help you
with trying to pay off that debt. examine your options.
Think outside the vacation box If you can contribute monthly to your vacation
fund, great. If you can't, consider adding small
Not being able to take a dream vacation does- windfalls like your tax refund, year-end bonus,
n't mean you can't take a vacation at all. Eve- or cash from birthdays and holidays. Knowing
ryone needs time away from their job and that you're setting aside money for a planned
normal family responsibilities to recharge. If "dream" vacation can go a long way to making
Keeping it simple you simply don't have the budget for the vaca- you feel less deprived in the years you can
When asked by one tion you want, think of other creative ways to only afford to stay close to home.
family magazine spend your time off. Here are some ideas:
And when it comes time to actually planning
about their favorite • Try a few long weekends instead of one your big vacation, keep cost-cutting tips in
vacation memories, or two consecutive weeks. Perhaps you mind. For example, you might consider less
most kids listed the can afford a couple of nights at a hotel or convenient flights or a night or two at a less
simple things--eating bed and breakfast instead of all week. Or fancy hotel.
ice cream, swimming, maybe you can camp for a few nights at a
staying up late, state or national park, where rates are Forget about the Joneses
jumping on the hotel very reasonable. It's tempting to want to take grand vacations
bed, fishing, lying in a
• Vacation from home. Take day trips into a every year when everyone else seems to be
hammock, picking
nearby city and visit museums, restau- doing so. But don't fall into the trap of thinking
blueberries. So don't
rants, and other attractions. Or head out that you or your family will somehow be
feel bad about
to the country for a hike, swim, and pic- scarred if you can't. The important thing is to
keeping things
nic. Doing things out of the ordinary, like relax in a way that you can afford, and then
simple!
eating breakfast three times a day or set- enjoy that time with your family. You will have
ting up a tent in the living room to play taught your children an important lesson--how
games and sleep in, can be a big hit with to live a financially sound life, without worrying
kids. Young kids usually just like being about what the Joneses are doing.
with their parents and are mostly happy to
go along with what you have planned.
Page 3
Modifying a Home for Independent Living
Because many homes aren't designed to special hinges that allow doors to open
accommodate changing physical needs, it's wider
sometimes challenging for people with dis-
abilities to live independently. But fortunately, • Install a ceiling lift device that will allow
homes can be modified to remove barriers to independent movement around the home
independence and reduce reliance on care- • Install a stair lift or an in-home elevator
givers. For older individuals, home modifica-
tions can delay or even prevent the need for Outside the home
costly care in a nursing home or assisted-
• Apply nonskid surfaces to garage floors,
living facility.
decks, stairs, and walkways
Improvement options will depend on individual
needs and physical concerns. But here's a • Install handrails on both sides of stairs
broad look at some of the home modifications • Replace standard exterior lights with
that might help make day-to-day living safer motion-sensitive or photo-sensitive lights
and easier for you or a loved one.
• Construct an entrance/exit ramp
Inside the home Daily living aids and
Paying for home modifications
Kitchen assistive devices
Many home modifications are simple and in-
• Remove cabinet doors to make it easier People often don't
expensive, but if you need to remodel exten-
to see and reach items realize how many
sively or hire a contractor, you may need help
products are available
• Use turntables inside cabinets to reach paying for improvements. Fortunately, finan-
to help people maintain
supplies easily cial help is available from public and private
their independence.
agencies and charities. For example, states
Here are just a few that
• Lower countertop surfaces and kitchen and communities may offer special financing
can be found at
cabinets to make them more accessible or grant programs, and charities often organ-
pharmacies and
ize repair or improvement projects. To find
• Install a cook top and a low wall oven medical equipment
help available in your community, contact your
instead of using a range; install an adjust- suppliers:
local Area Agency on Aging through the na-
able mirror over the stove to make view- tionwide Eldercare Locator at (800) 677-1116, • Amplified phones
ing cook top from a wheelchair easier or through their website, www.eldercare.gov.
• Large button
Bathroom Tax breaks remote controls
• Install a raised toilet with attached hand- If you itemize deductions on your federal in- • Lift chairs
rails (portable seats are also available if come tax return, you may be able to deduct
replacing the toilet is impractical) home improvements that are primarily for • Shower or
medical care and prescribed by your doctor. tub chairs
• Cover sink handles with rubber grips to
make it easier to turn the water on and off However, you can deduct only the amount
• Reachers that
that is more than 7.5% of your adjusted gross
grasp
• Install grab bars or poles near the toilet income. For example, if your adjusted gross
hard-to-pick -up
and shower income is $70,000, then you would be able to
items
deduct expenses that exceed $5,250. Ex-
• Replace bathtub with low-threshold penses that generally qualify include the cost • Optical
shower of installing ramps, lowering or modifying cabi- magnifiers that
Other living areas nets, and adding grab bars. If an improvement project text onto a
increases the value of your home, it may be TV screen
• Replace door knobs with lever-style han- only partially deductible. For more information
dles, or install door knob covers that are and a list of deductible expenses, see IRS • Personal
easier to grip and turn Publication 502, Medical and Dental emergency
Expenses. response
• Add nightlights to prevent nighttime falls systems
Some states also offer tax breaks to their resi-
• Remove throw rugs and thick doormats; dents, including sales tax exemptions, deduc-
replace padded carpet with thinner, level- tions, or tax credits; local property tax credits
loop carpet to prevent tripping and facili- or abatements may be available as well. For
tate wheelchair or walker navigation more information, talk to a tax professional.
• Widen doorways, remove doors, or install
Ask the Experts
Can reducing my credit card debt actually lower my
credit score?
Most lenders use an auto- identity theft through the fraudulent use of
mated credit scoring system inactive open lines of credit.
to help determine your
creditworthiness. The But if you do this, you could:
higher your credit score, the more creditwor- • Lower your total credit limit available with-
thy you appear. out lowering your total debt, thus raising
Synergy Financial Group
George Van Dyke One of the factors built into credit scoring sys- your balance-to-limit ratio--and potentially
401 Washington Ave #703 tems is your credit card balance-to-limit ratio lowering your credit score in the process.
Towson, MD 21204 (the amount of debt you owe compared to
410-825-3200 • Make your credit history appear shorter
410-530-2500 (cell) your total credit limit for all cards). Lenders by canceling accounts you have had
[email protected] like to see ratios indicating you're indebted for open longest--and a shorter credit history
www.synergyfinancialgrp.com
balances approximating only 30% of your total also may lower your credit score.
limit. Generally, if your balance-to-limit ratio is
George Van Dyke is a Financial higher than that, then reducing your debt will While it makes sense to transfer balances
Consultant with Synergy Financial improve your credit score. But how you re- subject to high interest rates to accounts with
Group of Towson Maryland. Securities
offered through Linsco Private Ledger duce your debt can make a difference. lower rates (and then concentrate on paying
(LPL) - Member NASD, SIPC. LPL down what you owe), consider waiting to
does not provide legal or tax advice. You may have heard that you should consoli- close the paid accounts. Keeping them open
The information contained in this
report should be used for informational date several credit card balances on one card may actually improve your credit score by
purposes only. with a low interest rate, then close the paid lowering your balance-to-limit ratio (since
Synergy's mission is to build, preserve (usually higher-rate) accounts. Doing so, the you'll have the same amount of debt, but a
and protect the capitol of our clients by claim goes, not only minimizes the risk that higher total credit limit) while maintaining the
offering a comprehensive and
professional level of advisory and you'll "dig the hole" of indebtedness even longevity of your credit history.
planning services as well as providing deeper, it also reduces your exposure to
exceptional customer service. Our
investment objective is to provide
serious investors with a very
acceptable after tax (where
applicable) total return over a long How can I tell if I have too much debt?
term horizon. In order to achieve our
client's goals, we recommend
investing in a diversified portfolio of It may sound like a bad joke to say that you the potential risk you represent to them.
high quality securities spread over have too much debt when you find you're un-
multiple asset classes. We place
able to borrow more, but there is more truth To be on the safe side, however, your debt
emphasis on creating tax efficient
portfolios and managing risk. Through than humor in the flippancy. service ratio should ideally be around 25%
modern asset allocation techniques, and no greater than 35%, while your debt
portfolios are assembled to match
each investor's individual investment In determining your ability to repay debt, lend- safety ratio shouldn't exceed 20% and should
goals and risk tolerance. We believe ers will examine your debt-to-income ratio. preferably be around 15%.
that strict adherence to a disciplined Calculating this ratio can involve a couple of
approach increases the likelihood of
different variations. Your "debt service ratio" While it can be difficult to live in today's soci-
generating consistent returns and
limits the risk of significant loss. compares your total monthly debt payments ety without incurring debt, it also can be diffi-
(including your mortgage payment) to your cult to live with too much debt. Here are some
gross monthly income. Your "debt safety ra- warning signs indicating that you may be too
tio" compares your monthly consumer debt close to the edge:
payments (not including your mortgage) to • You can't maintain an emergency fund to
your take-home income. cover 3 to 6 months of normal expenses
You will generally qualify for a conventional • You make only minimum monthly
mortgage if your debt-to-income ratio payments on your consumer debt
(including the potential mortgage payment) is
36% or less. Federally guaranteed mortgage • You're at or near your credit card limits
programs may allow debt-to-income ratios of
up to 41%. And unsecured lenders (like credit • You use credit cards to pay for things you
Copyright 2007 Forefield Inc. card companies) allow even higher debt-to- used to buy with cash
All Rights Reserved. income ratios--and then charge you higher • You take cash advances against your
interest rates to compensate themselves for credit cards to pay other bills
