Life After College

A New Term: Whole Life (Insurance for the Unexpected)

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We are sailing in choppy seas. Between the Coronavirus pandemic, the rising unemployment, civil unrest, and political chaos, it may feel like everything is out of control. Back when moneyman (that’s me!), laid out some themes for this year’s blog entries, this month was envisioned as a focus on “what happens when the unexpected happens.” That was the plan, at least. And then… the unexpected happened.

This…

We’ve discussed a lot in the last few months about the unexpected. We reviewed what to do when you have a loss of income or a change in circumstances in a post on Professional Judgment, we’ve discussed the changing situation of what to expect for the Fall semester, we examined the changing job market, and we’ve spent a LOT of time reviewing the changes (oh, so many changes) which came with the CARES Act and the HEERF Grants.

With that in mind, it is time to tackle some of the subjects which moneyman had planned to discuss in the month of June. Let’s start with life insurance.

You might say, but moneyman I am too young to think about that now. And you would be… completely wrong. The right time to think about life insurance is now, when you are young. Life insurance is the perfect way to plan for the ultimate in unexpected situations. By purchasing life insurance at a young age, you get two important benefits: a much lower monthly rate for your premiums, and the chance to qualify for insurance (hopefully) long before you have developed or suffered from any long-term health complications.

Life insurance is basically a bet on behalf of the companies who provide it. They are betting the likelihood of having to pay out a benefit and they base this generally on your age, gender, smoking status, and health condition. If you seek insurance as a 22 year old who is healthy and doesn’t smoke, your cost is going to much less expensive than that for a 60 year-old smoker with a history of diabetes and cancer.

Also keep in mind that life insurance premiums are monthly payments and the longer the possible length of payments before the company may need to pay out on the insurance, the lower the monthly payment will be. Also the more you ask for in insurance, the higher the monthly payment, so it would not be unreasonable for the same monthly payment to buy much more in insurance coverage for our hypothetical 22 year old above than it would for our 65 year old.

What about the different kinds of life insurance? There are many different kinds of life insurance, but we are going to cover the main two – term insurance and whole life.

Term insurance covers you for a specific period of time, and then ends. Under term insurance you can buy coverage for a specific dollar amount over a specific number of years and as long as you continue to pay the monthly premiums you are covered for the amount you have contracted. One of the downsides of term life insurance coverage is that after the coverage ends, you lose any money you have spent in premiums (so if you don’t use it, you lose it). One of the upsides of term life insurance is that it tends to be pretty inexpensive in comparison to other insurance types.

There is even a special kind of term insurance called permanent life insurance. Like it sounds, this is similar to term life except that the term is forever. So again as long as you pay the premium monthly, you will be covered for the amount you select, but the program never ends until you pass away (or stop paying your premiums). Again, the benefit here is the lower cost (slightly more than term life, but less than whole life). The drawback again is that if you cancel it, you lose your investment.

Then there is whole life insurance. Whole life insurance allows you to make a monthly payment, but there is no expiration date on the insurance. Your monthly payment is invested for you by the insurance company and builds cash value. Yur monthly premum is usually withdrawn form your payment, or is taken as a percentage fee on your earnings, but your investment remains yours. This means you can borrow against this if necessary (for emergencies) or if you cancel your program will receive a cash settlement. When you pass away, your insurance will pay the amount of the death benefit you have chosen minus any outstanding loan amount. This is a great choice if you can afford the monthly premium (which tend to be higher than term life).

It is true that you might earn more in returns if you invest on your own and direct your own investment choices, but for those who do not have time or inclination to make these kinds of decisions, whole life might be a good choice.

So why should you look at life insurance now? And how much should you choose to insure? And should you choose whole or term? This is really dependent on your monthly income and expenses. If you can afford whole life, you can consider your monthly payment into this program as your monthly savings amount as well (because you will eventually be able to access it, one way or another). You want to purchase as much of a death benefit as you can afford, because whatever amount you think you might need now will look very small when you ultimately need it. Imagine that right now you purchase what looks like an unimaginably high $200K death benefit, and then in 8 years you buy a house for $300,000 (right now the average home price in Orlando is $260K). You will kick yourself for not having a higher value when the premiums were cheap. Price it out and see what is affordable!

And don’t forget one other important kind of life insurance; the free kind. When you get hired by an employer ask if one of the benefits of employment is life insurance. Many employers will provide free (or significantly reduced cost) life insurance for you at 1X, 2X, 3X or more than your annual salary. Some employers will even waive the health screening for the higher levels of this insurance, but only if you take the benefit when you first are eligible for it; if you choose to take advantage of this in later years, you may have to go through a health screening first.

If you want to read a lot more about all of the different kinds of life insurance and the pros and cons of each type, check out this Investopedia page which has TONS of good information. Life insurance is the ultimate example of preparing for the unexpected, but we should all be prepared.

Oh, and the best news yet? Like retirement assets (401Ks or IRAs), life insurance plans are ignored as assets on the FAFSA. So you can save lots in your whole life plan, and never have to report it as an asset when you apply for financial aid.

Graduating on to graduate school

moneyman

“Graduate school? Really? But I just finished my undergraduate degree and now you want me to keep on going? Moneyman, what are you thinking?”

Great questions. And I’m here to answer them. Also the ones you didn’t ask: “How am I going to pay for it?” and “Shouldn’t I go out in the workforce first before I go on to graduate school?”

The choice is yours. Sort of…

In our current economic situation, some of you may be thinking that going on to graduate school after you finish your undergraduate degree is a good choice, and moneyman isn’t going to argue that! Especially if your chosen field is one where advanced degrees are a requirement for later promotions or for entry level interviews, a graduate degree now may be a wise investment.

If we look at data from the BLS (Bureau of Labor Statistics), we can see that a graduate degree pays off (on average) in two ways: increased weekly earnings, and lower unemployment. In fact, in 2019 the income difference between an undergraduate and a master’s degree was $236 per week (or about $12,300 a year). The difference is much higher for a professional degree, like a Law Degree or MD (an average of $686 more per week than an undergrad, or a total of $35,700 per year). Again these are only averages, but they are important to understand the financial potential impact of graduate education.

So if you want to go “back” to school to get your graduate degree, what should expect when it comes time to pay for it? Well, first, let me introduce you to an old friend — the FAFSA. The same form you have been using to apply for financial aid as an undergraduate is also required from you as a graduate student with a few important differences.

  1. You are automatically independent when you apply for financial aid as a graduate student. Even if you aren’t yet 24 years old, your FAFSA can be completed without parental information when you apply for graduate school financial aid (BUT — here is a warning — some law schools and medical schools may ask you to fill in the parental information anyway so that they can use this information to determine if you qualify for their scholarships).
  2. Your application for Federal financial aid will be for loans. The Federal government does not offer any widespread graduate scholarships (like the Pell Grant for undergraduates). Mostly you will do the FAFSA as the first step in qualifying for your Federal loans.
  3. Check to see if your graduate school requires any other financial aid application, either one of their own or using a third-party application system. If they do, fill it out since this may qualify you for scholarship or grant money.

You can likely pick up where I am going here. For graduate school, much of the money available is loans. In fact, you can take a look at Sallie Mae’s report on How America Pays for Graduate School and see that (at least in 2017) about 53% of graduate school costs were covered by student borrowing. The College Board’s Trends in Student Aid 2019 places the percentage paid through loans slightly higher (at 66%).

The “good” news is that between the Direct Unsubsidized Student Loan and the Graduate PLUS Loan you can qualify to borrow the entire cost of graduate education. In addition, there are minimal credit standards for these loans, so no cosigner will generally be needed unless you have an adverse credit history. Of course, these are loans that need to be repaid so you won’t want to borrow more than you can afford to repay.

But what if you want to minimize loans? Well, there is some better news here. Both the College Board and Sallie Mae agree; there is some grant and scholarship money available here (between 15 and 21%). Generally though these scholarships are based on merit and not need. In addition, some of these grants-in-aid may come with requirements for work (like teaching assistantships who lead undergraduate study groups as TAs, or research assistantships where graduate students serve as lab assistants or research fellows). Departments in graduate schools also often have funding sources of their own, so be sure to check with your department head (or better yet their administrative assistant) to see what other funding options are available.

As an example, take a look at UF’s and FIU’s webpages for graduate financial aid and you will see that they match the processes outlined above. And don’t forget the good advice moneyman offered you about private scholarships. Many private funders support graduate education, so make sure to apply for these opportunities.

There is no reason to put off graduate school, especially if you don’t have great luck right now in the job market. Of course, if you are working you also want to take a look at your employer’s benefit package — do they offer graduate school tuition for free? For example, Disney’s Aspire program offers free graduate degrees in a number of career pathways for hourly cast members (and the benefit is even extended during the current closure and furlough). Don’t forget that another great employer may be the university itself (and often tuition reimbursement or remission is a benefit of employment).

What questions about financial aid in graduate school are left unanswered? Let moneyman know by asking a question in the chat.

Please pass… the COLA.

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Please pass

For many of you, final grades are in and the Spring semester has ended (in fact, some of you may already enrolled in Summer classes). Hopefully your Spring grade were what you wanted them to be and you are looking at a great end to your semester.

Pass the New Grading Options, please!

I recognize though that some of you may have had a difficult semester, especially with classes moving completely online, the changes in living and working situations, and the need to return home from your campus.

Remember, your grades have great impact on your eligibility for financial aid. Previously, I wrote about the Satisfactory Academic Progress (SAP) requirements for Federal Aid (and if you missed the post, I recommend going back and reading it). As a reminder, we look at three things when we examine your SAP:

  1. Your completion rate (Federally required to be 66.67% or above).
  2. Your cumulative GPA (required to be 2.00 or better).
  3. Your maximum timeframe (150% of the number of credit required for the degree program you are pursuing).

Also remember that if you were already on Financial Aid Warning or working under a Financial Aid Academic Plan while on Probation, you may find yourself with a need to appeal this semester because of your academic difficulties. In a previous post on the CARES Act, I indicated that this semester the Federal Government has offered an opportunity for colleges to ignore classes for which you withdrew if the reason was related to the pandemic. There has been no final guidance offered from the Feds on this yet however so if you withdrew from classes this semester and you are now on a negative SAP status (like Suspension), I would advise speaking to your financial aid officer and letting them know about the CARES Act exemption.

Even if you didn’t withdraw from classes, this is definitely a semester to write an appeal for consideration from the consequences of negative SAP. If your school processes appeals, they can let you know how they prefer these forms or letters to be submitted (ask them or look on their web page), but don’t give up! Of all times, we understand this last semester was tough on you; it was tough on all of us!

The COLA

I also wanted to share a little more advice in this post for those of you looking at post-graduation jobs. With the recent April jobs report showing losses in every part of the job market, it may seem like the most difficult time to be looking for work. That may be true, but the national story is not the story of every part of the country. State and local metro unemployment rates (not yet updated for April) show that different parts of the country have differences in their experience of job losses.

Graduation from college is a time in your life where you can reinvent yourself; this may be the time to think about moving to a new part of the country, or even a different part of the state. You may want to think about relocating to a major city or metro so you can experience urban life if you haven’t done so before, or you may want to try something different than your big city and find someplace more suburban or rural.

Before you run off to start your new life, though, you want to make sure you understand the difference in COLA!

No, not these kinds of COLA

When I say “COLA”, I mean a Cost of Living Adjustment. Think about it this way: a $30,000 income is very different if you earn that in Pensacola, FL vs. Manhattan (NYC), NY. In fact, to maintain the same lifestyle in New York City you would need to earn slightly more than $78,000 (more than twice as much).

Why is that? Well groceries, housing, taxes, transportation, health care – it’s all more expensive in New York City. You may have intuitively known that, but how do you put a number behind that analysis?

Here is where I can help. There are lots of great calculators online that can help you figure this out. Try CNN’s, or the one at Nerd Wallet, or if you know the area of work you want to do, you may want to try this one at salary.com.

Just don’t forget that costs matter. As you are comparing salary offers and trying to decide whether a move to a new city is worthwhile, check the COLA.

Upcoming Plans

Just a reminder that we have a few more topics in our exploration of life after college! Coming up in the next posts: applying for financial aid as a graduate student, creating a post-college budget, and managing those “adult” things — like an apartment lease, car loan, etc.

Feel free to post your questions and suggestions. I’m here for you!

Managing the Interzoom

moneyman

Hey all. It’s been a few days. And during that time, moneyman has been spending a LOT of time on Zoom! (and Teams, and Skype, and GoToMeeting, and On24…). My entire day seems like a series of videoconferencing; so much so that some days it starts at 8:00 am and doesn’t finish until 6:00 pm.

Your parents will understand this reference!

This image might seem familiar to you too. Maybe you are participating in online classes this way, or maybe you’ve been talking with family or friends via Facetime or one of the web-based platforms that have seem to have taken over our ways of communicating with each other.

Chances are that if you are looking for a job right now, your entire interview process may be held via one of these platforms as well. Interviewing in person? That’s so 2019!

So what do you do? How do you prepare for an online interview? What traps should you look out for? Let’s continue our exploration of the job market for those of you who have graduated or are graduating that we started before with a focus on The Interview!

Securing an interview is the goal of your application, resume and cover letter. The interview is as much your chance to get to know the company as it is their chance to get to know you. With that said, it is very important that you take the time to prepare for your interview.

Some companies will use a preliminary screening interview with an HR (Human Resources) staff person, or an online interview tool (like HireVue or SparkHire). If you are asked to do an online pre-interview chances are it will be asynchronous (meaning you will be able to do this at a time of your choosing and there will not be someone else of the other end of the video connection). Your interview answers will be recorded and will be viewed by members of the committee to determine if they want to advance you to the next round of interviews.

Usually the 2nd round of interviews are done in person, although in our current reality they may be live interviews using a web-based meeting solution (like Zoom or Skype). This will allow you to connect with the hiring manager (the person ultimately responsible for making the decision about who to hire and quite possibly your ultimate boss) and the other members of the hiring committee.

Regardless of whether you will be completing a preliminary, first or (possibly) second round interview, there are some common tips or tricks moneyman recommends:

  1. Dress for the job. You want to look professional. Even if your interview is “just” online, make sure to wear a professional attire. Your appearance makes an impression, and proper dress and grooming are expected for a professional job. Of course, if you are interviewing to be a caterer, the attire is different than if you are interviewing to be a banker. Wear something appropriate.
  2. If you are doing your interview from home, make sure that you are in a private space with a neutral background, and make sure you won’t be interrupted. Let your spouse / roommate / parents / fur-baby know that you need some private time and cannot be interrupted. You definitely don’t want to have to end your interview or be pressured to rush to finish because you need to answer your door or let someone into your room.
  3. Find out who you will be meeting with. If you can, ask who the members of the interviewing team will be and get their names and their titles. There are a few reasons for this: you want to write a thank-you note after your interview (more on this later), AND you want to do some research on the members of the interview committee before you walk in to the room. Look for members of the interviewing committee on Facebook, Twitter, Instagram and LinkedIn. Do a Google search on them. Find out if they have been profiled in their company publications or if information about them is on the webpage. The reason for this is that it provides you a way to connect with each of them when they ask you a question (or when you answer one). For example, if a Ms. Jones is a member of your committee and you know that she enjoys watching college football, you may be able to connect this in some way to an answer you provide in the interview.
  4. Just as you are doing research on your interviewers, you should assume they are doing research on you. You need to go back through your Social Media feeds (Facebook, Instagram, Twitter) and remove those photos and posts you wouldn’t want your mom to see (and if you cannot or don’t want to remove them, mark them private). (Read this article for more information on what employers are looking for on your social media profile).
  5. Have a well thought out list of questions to ask your employer about the job and about the workplace (and make these more than just about the hours and conditions of work). This post offers 22 good questions to ask during an interview and while I support most of them, you need to make sure that the final question (what is referred to as “The Final Steps”) feels natural and not uncomfortable to you as you are asking it (for example asking about the next steps in the process may feel very natural, but asking what concerns the interviewers have about your fit for the job may not feel as comfortable).
  6. If you have your phone with you, silence it. Do not open your phone, look for notices, or pull it out during your interview. Doing so is a sign that you aren’t really interested in the job.
  7. Arrive early. If the interview is online, test your connection the day before and show up to the virtual meeting at least 10 minutes early. If your interview is in person, arrive 20 to 30 minutes early to the site, find parking and where you are going, and be in the interview room at least 10 minutes early.
  8. Be prepared for a writing test, or some aptitude test. Especially for entry-level jobs, it is possible that you could have a written test to check for your written communication. You may be asked to pretend to respond to a customer email, or provide an answer to a question in written essay form. Practice this beforehand by doing research on the company, industry and particular job for which you are applying.
  9. After the interview is over, thank the interviewing committee for their time. Don’t be afraid to take notes during the interview (ask if the committee minds if you do so first). Make notes about what individual interviewers have asked you, or particular responses that stand out to you. This way you can make sure to include this information when you write your thank you notes.
  10. Send thank you notes to every member of the interviewing committee. Make sure each email is individual and personalized. Reflect back on a question that particular interviewer asked you, or something they shared personally. Sadly, many candidates do not send thank you notes; this will make you stand out from your competition and will serve as another way for you to restate why you would be the best candidate for the job. Make sure to send these notes within the first 24 hours after your interview.

There are many more tips I could offer, but this is a good start. It is also wise to practice your interviewing technique with some friends or family members to get a sense of the rhythm of the interview. The University of Mary Washington in VA has a listing of some common generic interview questions you can use to prepare. While you don’t want to memorize specific answers to questions (this is not a dramatic performance), it is a good idea to think about how you might answer several of these in case they come up.

What questions do you have about interviewing? What horror stories can you share about interviews that have not gone well for you? What great tips do you have that I haven’t covered?

Next time we will talk about building your post-college budget and determining the difference in Cost of Living between two different metro areas.

“…Our Regularly Scheduled Programming”: Life After College

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It’s a television cliche: “we interrupt this broadcast for the following breaking news announcement”. After three minutes of an update that you likely already knew because of your phone notification, another announcement: “we now return to your regularly scheduled programming, already in progress”.

If only it were so easy.

Sorry for the interruption!

With some states beginning to make first steps towards reopening (see South Carolina and Georgia), it may feel like we are starting to head back into regular schedules, but moneyman has his doubts. At moneyman’s employer, students will be taking courses online this summer, and it looks like staff won’t be returning to campuses until at least the end of summer. So is a return to normalcy really possible?

Some of you may not have a choice. If you are graduating from your undergraduate education you face a dilemma: enter into (what may be) a difficult job market, or begin graduate school. In the next few posts, I plan (key word here – plan – since breaking COVID-19 financial aid news could derail my plan) to talk about life after college. We are going to talk about building a budget, applying for financial aid as a graduate student, managing what might possibly be your first apartment lease, and how the cost of living may impact your city of residence.

But today I want to start by talking about jobs. In this environment, how do you go about looking for jobs? Where do you begin? How do you interview? What should you expect?

Let’s start with looking for work. In the “old days”, you used to be able to take a look at the “Help Wanted” section of the newspaper (particularly the Sunday edition) and look at all of the employers offering work. Obviously things have changed. Most employers list their jobs right on their websites (including, often, their salary ranges, their benefits and the particular job responsibilities). As an example, take a look at UF’s job page. While you will notice that at the moment they are in a hiring freeze, you can see the information about the staff and student positions or faculty and post-doc positions.

If you have a particular interest (say banking or higher education), chances are there is a website that collects job opportunities nationwide for you in your chosen field (see the links above). You may also want to look at professional associations (particularly national ones) who will often have their own lists of jobs (as an example: actuaries or financial aid officers).

Check out your campus career center. Some of them may have online tools that can connect your academic interest with live job postings (SJR State’s Career Coach page is a great example of a friendly tool that can help you explore options in their service area).

Also make sure to network with friends, family, former employers, faculty and your other favorite people to see what connections they might have. Networking with people you have met during your journey is always a great way to learn about new job opportunities.

Finally, never overlook the opportunity to do an informational interview. This is where you choose someone who has the kind of job you want to have, ask for thirty minutes to an hour of their time, and interview them about their history and experience. This is a great way to learn about the avenues into a career, and provides you some insight into what skills and talents you will need to build to be successful in your chosen field. Berkeley has a great page with suggestions on planning and having an informational interview! Their best suggestion: like I said above, reach out to those you know since there are likely many contacts you didn’t even know you had.

If you haven’t built a professional resume (or haven’t looked at it recently), now is the time do so. FSU’s Career Center has a list of online resources for great resume building. Here are some of moneyman’s tips:

  1. Be sure to get a professional email address. Nothing discourages potential employers more than seeing a resume with 2hot4words@xxxxx.com as the response address (read the article).
  2. Make sure to save your resume as a pdf, especially if you are using a font other than Times Roman or Calibri. You don’t want your beautiful professional resume (which is perfectly formatted) to be viewed in a messy unorganized manner. More on the choices in this article.
  3. Always write a cover letter. The cover letter is your chance to show how your experience on your resume perfectly matches what you read in the job description. Here is a great description of the pros and cons of the cover letter. A great cover letter matters!
  4. Like your essays in college, spelling and punctuation matter. Most managers make a decision within 10 seconds of seeing your resume and you want your resume to stand out, but not in a bad way.

OK so this post is running longer than I thought it would, so we will cover the job interview next. For now, where are you searching for and finding job postings? What are your favorite tricks to identify new opportunities?