5 Steps to Turn Your Financial Pain into Power

As we continue to mourn the loss of Muhammad Ali, one of the most prolific athletes and fearless leaders of our time, I am reminded of his charm and wisdom – so infectious. This quote of his sticks out:

“Only a man who knows what it is like to be defeated can reach down to the bottom of his soul and come up with the extra ounce of power it takes to win when the match is even.”

Powerful, right?

Well, we can all take a page from Ali’s approach of turning defeat (and the pain that accompanies it) into power.

This is especially relevant when it comes to your money. Everyone goes through financial pain, and it is no joke. I experienced this most recently when one of my stocks, GoPro (Ticker: GPRO), went into the toilet. I said it – the stock is down 30% since the beginning of the year. PAINFUL as I see the red ink signaling that I have lost money! (Remember – I haven’t sold the stock yet so it still is a paper loss.)

So, what is one to do when pain comes your way as it has come mine?

5 Steps to Turn Financial Pain Into Power 

  1. Acknowledge the financial pain to yourself.  As easy as it is to curl into a ball, resist this temptation. One way to do this is to focus on what’s going right in your portfolio and recognize that it’s not all bad. Whether your pain comes from a bad stock or loss of income, acceptance is first.
  2. Share your financial pain with others who care. Notice I said those who care.Your trusted friends and family need to know what’s keeping you down. I trust you!
  3. Revisit your financial goal. You must ask yourself why you invested in a position and whether those reasons still hold up.
  4. Make a decision to mitigate your financial pain. If the financial goals are still valid, hold tight and assess whether you should invest more, wait it out more, or cut your losses.
  5. Move on, in POWER. Take your mistakes into consideration and make the next financial decision with the full comfort that you know a little more than you did before.

Other Helpful Resources to Motivate You This Week

I spent a lot of time this week digesting powerful video content in taking action and beingmy badass self. One that stood out is a song called “God’s Intentional” by Travis Greene.  Regardless of where you fall on the spectrum of faith, I think you’ll get a kick out of the words – it’s one of my new favorites!

Go Get ‘Em

Want a Magic Pill?

I hope you embraced this Mother’s Day weekend, albeit living as a mother yourself, celebrating a mother in your life, or remembering one that has made an impact on you. I have always thought that my Mom had some kind of magic pill that gave her energy, always made her smile, and provided multi-tasking skills. In my mind, this pink magic pill allowed her to work a long day, take care of my brother and me growing up, and still keep her other relationships – as a wife, daughter, sister, aunt, and friend.

I eventually came to realize that there was no pill. Yup, to my dismay, no magic pill existed. Instead, it was her hard work, sacrifice, and definitely some prayers!

When it comes to our money and investing, it is easy to assume that others have gained their wealth by some magic pill. To no surprise, many people feel that you can take a magic pill for dieting too. (Side note – I read this weekend’s New York Times piece on “Why You Can’t Lose Weight on a Diet,” and mindful eating is suggested.)

Removing those who inherit large sums of wealth, most people who invest make hard choices, short-term sacrifices for long-term gain, and stay disciplined.  Let’s not kid ourselves - Having a certain level of income does help too. And, while luck and blessings sometime pay a part in reaping financial success, I want you to know that it takes work too! And, you are capable of hitting your financial goals.

Just look at one of your fellow readers, who hit a BIG goal this week:

Nicki Carr paid off $7,000 in credit card debt over the last twelve months. Nicki told me that she is now going to allocate the money she would have used to pay off her credit card to investing, and specifically in ETFs. 

Nicki asked me to share that she makes less than $75k, so if she can do it, you can too in your year of action. If you need a refresher on ETFs, check out my video!

Pay Off Debt or Invest? 

I know what you’re thinking – well, Charisse, Nicki may not have other outlays of cash that you have. You’re right – you do not know and nor do I. What I do know is that Nicki made it a top priority to pay off high-interest rate credit card debt (in her case, 22%) before investing. I agree that she made the right financial choice because the stock market has only returned 7% historically, which is a lower return than 22% on a credit card. Check out this article that goes through the math of making a decision between debt and investing.

You too can make great financial decisions!

Five Strategies for MBAers to Reduce Debt and Drama

Do you know someone in a Masters of Business Administration (MBA) program? Or, maybe you are headed into a MBA program for the first time this fall. And if you're in the privileged position of returning for one more year of intellectual stimulation, or might I dare say parties and pre-school trips around the world, then good for you. Either way, I’m sure that you cannot spend five minutes in conversation without someone linking the word student to debt. I graduated from Chicago Booth’s MBA program in 2010 and some of us are still debating the value of our MBA given the high debt load we assumed. The average student debt can often exceed $100,000from a top 10 MBA program. I sympathize even more with the current MBA student because many elite schools have increased tuition 37% in the last 6 years. Many students are forced to take passionless career pursuits to earn enough money to cover their +$1,000 monthly student loan payment, delay their entrepreneurial dreams, or make different life choices around marriage and kids all in the name of their degree.

Absurd, right? Not for the MBAer because this is their reality, particularly in years immediately after graduation. Most MBA grads will eventually come to truly value their education, but this occurs in hindsight after their student loan balance decreases.

Over the last few years, we've seen the federal government develop many innovative solutions to reduce debt after you get your degree. And even the private industry has stepped in to help graduates refinance their loan, which can put thousands of dollars back in your pockets. Less attention, however, has been paid to help prospective student, especially MBAs, before they arrive at (or return) to campus.

Here are five strategies to potentially lower your debt burden if you are a prospective or current MBA student:

1. Take ownership of your controllable MBA yearly cost, really.

If you are going to get your MBA, your first step is to figure out what your total out-of—pocket costs will be. If you are already in a program, tuition is predictable, but you now have a better sense of what you are willing to pay on rent, transportation, and books. You’re probably considering other expenses that might have a high price tag like a Spring Break trip to Kenya to bond with classmates and have impact. I too took some class trips, so I lived with roommates to lower my housing spend, took public transportation, and structured quality time with classmates over tea and lunch instead of bars to cut my overhead. Making smart trade-offs can effectively lower your student debt load and give you ownership of your controllable MBA costs.

2. Check the federal government first.

Once you nail these costs down, the next step is how will you fund these costs.

Some of you will cover costs with your own savings, help from family members, or even leftover funds from a summer internship if you are heading back for year two. If you’re like most people, however, you will need to tap into the student loan machine. It is widely purported that the Federal Stafford Program should be your first line of attack, and I could not agree more since the rates are reasonable and there are alsoloan forgiveness and income-based repayment perks associated with the federal loan program. Since an MBA student can currently only borrow $20,500 per year from the Stafford program, borrowers who need more than this amount do have another powerful option – the private loan market.

3. Explore The Private Market For Your Situation

Let’s start with the premise that private loans can work in your favor if you get the right one, which will have an interest rate that beats the Federal Graduate PLUS loan, the federal loan option for graduate students after you’ve maxed out Stafford. The right loan for you should also have an easy application process, provide excellent service, and mimic the benefits offered with Stafford and PLUS loans, including a grace period for repayment and protection against income loss. To find the best rate on private loans, utilize your school’s list of preferred lenders, which is a great starting point for your research.

The two companies that are specifically focused on in-school MBA loans areCommonBond and SoFi, which were both started by empathetic MBA alums who wanted to provide an effective way to reduce debt. You can use this easy savings calculator to figure out the amount of money you will save by choosing CommonBond’s loan instead of a Grad Plus Loan in less than 60 seconds. I did the analysis and if I maxed out Stafford and needed $80,000 more in student loans, I would save $10,000 over the life of a 10-year loan at a fixed rate of 5.99% versus 6.96% in a Grad Plus (and assumes you get a 0.25% rate reduction on both from auto-paying). Keep in mind that CommonBond’s rates do not move based on your credit history; every borrower who gets a CommonBond MBA Student Loan has the same rate. SoFi also offers MBA loans, and the company offers both variable rates and fixed rates on the loans. Going the variable rate route comes with risk, including rates rising and an unpredictable monthly payment.

The smaller MBA loan providers have program perks that might be meaningful to you. For example, CommonBond’s 1-to-1 Social Promise program funds the education of a student in need abroad for a full year for every degree fully funded its platform. And, SoFi’s Entrepreneur Advantage program provides support to budding entrepreneurs.

Now, you can also go with more established private student loan providers like Discover, Sallie Mae, or Wells Fargo. Call anyone and I think you will be surprised at the level of detail you receive relative to the smaller and MBA-focused, companies like CommonBond and Sofi. Don't worry, these companies are well-funded so I suspect that they'll be around for a long time as they grow. A good rule of thumb is that if you plan to take out a private loan, make sure that it can mimic some of the important benefits offered with Stafford and PLUS loans, including a grace period for repayment and protection against income loss.

4. Focus on side-jobs to pay interest while in school

The life of an MBAer is incredibly busy with networking, classes, fun time, and oh yes, there's studying. But, if you can carve out any opportunities to earn extra money as a teaching assistant or some other job for which you have the skill to provide, then go for it. Also consider putting yourself in a position to earn rental income during your time at school, reach for the stars. I know this is a stretch but believe me, some of your classmates are making it happen. Buddy up!

If the job market gets tough, as is the current case for lawyers, you do not want to be saddled with more debt than you can handle. For instance, many law school graduates are underemployed; they are performing jobs that do not require a law degree because there is now a demand-supply imbalance at big law firms. As a result, a prospective MBA grad needs to fully consider lowering the total debt burden today to hedge against the risk that he or she may not earn the average +$100,000 salary post graduation.

5. Have a fearless attitude.

For many people, and MBA students are no exception, fear of the future can play a big role in our decisions today. If you fear student loan debt, there is no need to do so anymore. Capitalize on understanding what your total cost will be, try to reduce the non-tuition expenses even by a few thousand dollars a year, explore the Stafford loan option first, attack the private market, and get a side-hustle. If the numbers and overall perks do not work for you, guess what? You do not have to accept the loan.

You have one life to live and it’s yours to live most expectantly.

Fear not!