Tips to Find a Tuition Free College Education

Tuition-free colleges? Is that insane or even possible? A quality college education doesn’t have to be insanely expensive. Parents and students should not be bankrupting themselves now or jeopardizing their futures by going into an insane amount of debt.

With some planning and a diligent college search, you can find at least 20 tuition-free colleges that may rescue your family from years of paying back student loans. And while scholarships are fine, we’re not talking about that. We’re talking 100% tuition-free, leave your checkbook at home colleges. (For more, see: A Roth IRA or 529 Plan for a Grandchild’s College?)

Rising Costs of Higher Education
Since 1978, the cost of college has risen by more than 1,225% compared to inflation as measured by the Consumer Price Index (CPI), which has “only” risen by 279%, according to While the cost of a college education has risen four times as fast as inflation, it has even outpaced the other exorbitant family expense: health care. At least we’ve been seeing medical expense inflation slow. Not so with college tuition, yet.

There may be a lot of reasons for college costs to rise so much. Campuses have certainly added lots of new buildings and taken on debt to upgrade facilities. Concrete block dorms have been replaced by sleek apartment suites. Simple gymnasiums have been upgraded to facilities that rival many Olympic training centers. Simple student lounges with a few couches have been given a total makeover to include bistros, baristas and bowling alleys. But one of the biggest expenses on many campuses has been the number of non-teaching faculty, managers and support personnel.

College costs continue to skyrocket at more than 4% each year, higher than general inflation. It’s a depressing thought that a family with a toddler may be looking at spending far more to educate one child than the cost of their first house. And for some families with three toddlers (me included), this can be more than a depressing thought.

How can families try to cope with this expense? If you’re open minded and plan ahead, you can find one of these many tuition-free colleges may fit the bill without the high price tag.

Free: The New Price of a College Degree in America
How does free sound to you? It sounds pretty darn good to me. If you were free from the financial worries of trying to pay for college, then you could fund your retirement, pay down other debt, and – if you’re a graduating college student – you’d be in a better position to launch into your own life and take a seat at the adult table.

And even though neither Bernie Sanders nor Hillary Clinton will be occupying the White House, there are still ways to make the dream of free college come true for some. You have some options to join the trend toward online education using Massive Open Online Courses or MOOCs. Using technology, these programs are revolutionizing distance education in initiatives such as Ed-X. For a more complete list of courses and programs, you can visit

Traditionally, students have had options of getting free college tuition by getting accepted to a military service academy or joining the military or National Guard. More recently, there have been options for individuals working in non-profits or in education or as a first responder to get student loan debt relief.

Some private schools have implemented a “no loans” policy which means that they provide grants instead of loans to fill any gap between a family’s Expected Family Contribution (EFC) and the advertised cost of school. While not free, this does significantly reduce the cost to a family. One such option includes Davidson College, a highly selective independent liberal arts college with just 1,900 students north of Charlotte, North Carolina.

But what I’m talking about here are schools that offer a quality education for free – absolutely nothing. These outliers can be very selective and in return, some require that a student work on a ranch or help build container ships.

Some schools offer tuition-free college educations or other financial assistance to families that have incomes below certain targets. And there are several Ivy League colleges that have implemented programs to remove economic barriers. At Harvard University, if your family’s adjusted gross income (AGI) is at or below $65,000 per year, parents will pay nothing. For more information, check out Harvard’s Financial Aid Initiative.

Tuition-Free Colleges
Here is a partial list of schools that offer this unique opportunity.

Alice Lloyd College: A Christian-centered liberal arts college with just 600 students highly ranked by U.S. News & World Report, requires students to work on campus or in the community in exchange for free tuition.
Antioch College: A private liberal arts college in Ohio, has a required co-op program for all students. The tuition-free package is worth at least $121,000.
Barclay College: Located in Kansas, offers a Bible-centered education on a campus of about 250 students and nearly a 50% acceptance rate for applicants.
Berea College: Located in Kentucky, is a private liberal arts college with about 1,500 undergraduate students and requires all students to work at least 10 hours per week in campus-approved jobs.
College of the Ozarks: A private, Christian liberal arts school in Missouri with about 1,500 students ranked 10 by U.S. News & World Report for Midwest colleges that also require students to work on campus.
Curtis Institute of Music: Located in Philadelphia, is focused on music performance and boasts a highly selective application process.
Deep Springs College: Offers an alternate education program for a two-year degree that prepares students for successful transfer to schools like Harvard University, Princeton University and Yale University.
Macaulay Honors College at City University of New York (CUNY): A liberal arts college that requires community service in exchange for free tuition.
Webb Institute: Located in New York, known for its engineering programs devoted to ship-building and design.
Williamson College of the Trades: Formerly the Williamson Free School of Mechanical Trades, is the only men’s only trade school in the U.S. that provides 100% full scholarships to cover all textbooks, tuition and room and board.
Free Tuition Colleges Based on Family Income
There are also a number of colleges which offer free tuition for families that have limited income or assets. These include selective schools such as:

Cornell University
Duke University
Harvard University
Massachusetts Institute of Technology
Princeton University
Stanford University
Texas A&M University
University of North Carolina at Chapel Hill
Vanderbilt University
Yale University

Almost all the colleges on these two lists are highly selective. Each has a different learning environment that may not be suited for all students. This is why it’s important your college search process should go beyond a college visit. Parents and students really need to consider the question of paying for college and add an assessment that helps match up a student’s abilities, motivations and learning style with the right school. A more motivated student who is in the right learning environment will be less inclined to drop out, change majors or transfer, which will save you and your student a ton of money in the end if that tuition doesn’t turn out to be free.

Some Tips That Will Help Your Finances in 2017

Here are five different ways you can increase your savings this year.

1. Max Out Your Retirement Plans
In 2017 you can defer up to $18,000 of your salary into an employer-sponsored retirement plan such as a 401(k), 403(b), or 457 plan. If you are age 50 or older, the IRS has a special catch-up provision which allows you to contribute an additional $6,000 for a total contribution limit of $24,000. If your employer doesn’t offer a retirement plan, you may still be eligible to contribute to a traditional or Roth IRA. The IRA contributions limits for 2017 are $5,500 or $6,500 for those age 50 or older. If you didn’t maximize your IRA last year, there is still time. The Internal Revenue Code has a special provision permitting you to make a 2016 contribution up until April 17 of 2017.

2. Know How Much You Are Spending
Most people have no idea what they are actually spending. While some bold participants may blurt out a response when asked, in my experience what people say they are spending and what they are actually spending are two very different numbers. A good back-of-the-envelope approach to calculate your spending is to look at your final paycheck for 2016. Take your year-to-date gross pay and subtract any taxes paid as well as any employee benefits such as medical, dental, and retirement contributions. This in effect is your take home pay. From there, subtract any additions you made to long-term savings accounts throughout the year and you have calculated your annual spending.

Most people are surprised by how much they are spending. Now that you know how much you’re spending, keep any eye on major outflows and set up an automatic transfer to your savings account to ensure some money is put away before hitting your pocket.

3. Review Your Investment Portfolio
When it comes to determining an appropriate asset allocation, most people take the set-it-and-forget-it approach, meaning they randomly picked some stock and/or bond mutual funds when they enrolled in their employer retirement plan and they have not looked at it since. For many of us this could be five, 10, or even 20-plus years. Now is the time to review your most recent portfolio statement to see if your current allocation is still appropriate for your age. Traditionally younger investors can be more aggressive and allocate a higher percentage of their portfolio towards equities. On the other hand, seasoned investors who are approaching retirement may want to reduce risk by diversifying into more bond funds and fewer stocks. If your current asset allocation is appropriate for your age, be sure to rebalance your accounts annually to make sure your portfolio stays properly aligned.

4. Take Responsibility
The glamorization and/or demonization of politics and economics by the media can be hard to ignore because they are on the face of every TV station, newspaper, and social media site. Nonetheless, it’s essential to remember that for the most part, these situations are out of your control. But that doesn’t mean you should sit idly by and hope for the best. To use a weather analogy, while you don’t have control over when the next snow storm will hit, you do have the ability to buy snow tires for your car, a new shovel, and salt for your driveway. By personally managing the internal factors in your life such as how much you save, your consumer loan balance, and the size of the home you purchase, you are taking responsibility for the aspects in your life that allow you to control your own financial destiny rather than taking a back seat to external factors over which you are powerless.

5. Invest in Yourself
Many people don’t realize that the greatest financial asset they have is themselves—their ability to earn a living. Investing in post-secondary education, technical training programs, and advanced degrees go a long way toward building a complete resume. Combine these skills with quality work experience and you’ll have positioned yourself for a financially rewarding career.

Tips to Improve Your Financial Health in 2017

Your financial well-being is equally important to the traditional “new body, new you” goals that are rampant after the holiday season. Whether you’ve overindulged in food or spent a bit more than intended for gift giving, it’s natural—and healthy—to seek suggestions on how to scale back on the excess. Perhaps you’re headed for retirement and desire to focus on increased savings for the post-work years. Or home buying is slated as your prime objective.

By now the onslaught of New Year’s resolution posts has died down, and all prominent voices in the financial industry have levied their “financial fitness for the new year” advice. Rather than sifting through an endless stream of data on the matter, I’ve curated the top tips for improving your financial health in 2017. The following is applicable for all generations: Boomer, Generation X, Millennial and everyone in between.

Pay Off Credit Cards or Consumer Debt
It’s true that debt can be leveraged to help when you’re in a financial bind—car troubles, sudden health related emergencies and so forth. However, the interest rates are an additional expenditure that slows the process of stashing cash in other, more lucrative places.

Rather than paying the interest rates, that money can be transformed into a financial work partner by placing the amount in savings or, if you’re inclined, an investment portfolio. Certainly, maintaining a healthy credit rating is part of the money management system. Yet, if you’re the type who can’t pass up a sale and whip out your credit card to pay for more stuff, then credit card consolidation is a resolution for you to seriously consider. Pay yourself, not the credit card companies.

Maintaining a Budget Is Crucial
All items on this list lead back to budgeting. It’s easy to become enraptured in the constant stream of subscription entertainment or online instant gratification purchasing. Five-dollar cups of coffee or weekly dinners at your favorite restaurant can be included—though removing them for a month, or three, isn’t exactly deprivation. At the very least, monitor your spending for a week to determine where your money is going. Then begin to scale back on small things within each budgeting category.

Save, Save, Save
Though saving and budgeting are intertwined, this category warrants its own emphasis. While you set up your budget and scale back on the nonessentials in each budget category, make sure that you include a target amount to save per month. Your target savings amount is what you’d need for three to six months of expenses in the event your income stream is disrupted. Yes, it’s that simple. The challenging part will be curbing former spending habits. However, with diligence and focus, you can retrain your brain to stay on course with your intention. Remember intention flows to where our attention goes.

Investment Engagement
As with everything on this list, choosing an investment instrument is a highly personal endeavor. There are plenty to choose from. Every investment opportunity is balanced against a certain amount of calculated risk and given the variety of financial products available, there’s a sector for every risk level. A significant initial financial outlay is not always required to put your money to work for you. Indeed, instead of spending money on your credit card debt or restaurant dining, that money can be what Kevin O’Leary refers to as a soldier you send into battle every day to bring you back your fortune. Even if all you do right now is transfer $50 per month into a savings account, which is a small initial investment step (and you’re investing in yourself, ultimately), then you’re cultivating a habit that can provide far greater security long-term security than that daily $5 latte.

Information About Saving for College Is a Bad Idea

Is there a time when saving for college is a bad idea? With student loan debt repeatedly in the news as one of the country’s biggest financial problems, it’s a question worth asking. And the answer? Maybe.

When Saving for College Is a Bad Idea
For some families the need for college financial aid is clear-cut. When parents have low incomes and few assets, there’s little need to strategize when it comes to applying for financial aid. The same is true at the wealthy end of the spectrum: Parents will likely be expected to pay their children’s college bills in their entirety.

But what about everyone else? The majority of middle-class families, and even many upper-middle-class families, may well qualify for some degree of financial aid. Could saving for college reduce their eligibility for help compared with other families?

In fact, there are perfectly permissible money strategies that can help reduce the amount that colleges will expect a family to contribute to its child’s cost of attendance: tuition and fees, room and board, and books and supplies. Some might call this gaming the college financial aid system; others might consider it smart planning based on knowing how financial-aid formulas count different types of income and assets.

We’ll let you make your own decisions about what you feel is fair and ethical. But before you can do that, you need to know how financial-aid formulas work and what your options are for maximizing your aid award.

Key Income Cutoffs
Schools calculate what families can spend on college using two components: the parents’ income and assets, and the student’s income and assets. When household income is less than $30,000, the family’s expected financial contribution (EFC) toward the cost of attendance is zero, explains Kristen Moon, an independent college counselor and founder of Moon Prep. If someone in the family receives a federal benefit such as welfare, it helps substantiate that the family needs financial aid.

When household income is less than $50,000, some income is counted toward the family’s EFC, but no assets are counted. Bank account balances, plus the value of any stocks, bonds and mutual funds, don’t count in this case. Aid formulas expect parents to contribute 22% to 47% of their income after subtracting an income-protection allowance for taxes and basic living expenses. The formula protects about $6,400 in student income, then expects 50% of a student’s income beyond that to go toward college expenses.

Because financial-aid formulas have so many inputs – including income, assets, family size, parent age and the number of children in college – it is difficult to estimate an upper income limit at which a family would not be eligible for any financial aid, but $180,000 in annual household income is a possible cutoff. However, it is far better to file the Free Application for Federal Student Aid (FAFSA) and see what aid you qualify for than to assume you won’t qualify for any and potentially miss out.

Income and Assets That Reduce Eligibility the Most
Whether assets are held in a student’s, parent’s or grandparent’s name, as well as the type of asset, affects how FAFSA’s formula determines EFC. In addition, student income is treated differently from parental income. By understanding which types of income and assets count against you the most, you can strategize to reduce your EFC and maximize your student’s aid award.

1. Unnecessary Income

Realizing capital gains by selling appreciated assets (such as stocks and bonds), taking retirement account distributions and even withdrawing Roth IRA contributions will hurt you, because these will all be counted as income on the FAFSA, says Mark Kantrowitz, publisher and vice president of strategy at the college scholarship search website If you can take any of these actions before the tax year that applies to your first FAFSA filing – or postpone them until after your child graduates – you may qualify for more aid.

2. Assets You Aren’t Required to Report

Common mistakes that families make on the FAFSA can hurt their aid. These include listing the family’s principal home as an investment (FAFSA exempts the family’s principal home from its asset calculations) and listing retirement plans as investments (FAFSA doesn’t require you to report the assets in qualified retirement plans such as individual retirement accounts (IRAs), 401(k)s, 403(b)s and pensions).

3. Assets in the Student’s Name

Financial-aid formulas protect a certain amount of parents’ assets depending on the number of parents and their age, but they assume that nearly four times as much of the student’s assets are available than they do the parents’ assets, says Joshua Wilson, partner and chief investment officer at WorthPointe Wealth Management in Dallas.

While the top asset contribution rate for parental savings is 5.64%, the contribution rate for all student assets is 20%. For every $100 a parent has in savings, colleges will expect them to contribute a maximum of $5.64 toward the child’s college costs. For every $100 a student has in savings, colleges will expect them to contribute $20.

In most situations it’s better to have money in the parent’s name than in the child’s name, Wilson says. People often make the mistake of transferring money into the student’s name or leaving new money in the student’s name. “If your child is working to pay for college, make sure they aren’t saving any earnings,” Wilson says. “That savings will only hurt their aid the next time they apply.”

Instead, working students should take money they would have saved and apply it to any student loans they’ve taken out. “Then apply for new loans for the upcoming semester after you’ve depleted your savings account by paying down old loans,” Wilson says. “I know it sounds silly, but having money in your account hurts you.” This also reduces the size of the loan the student will have to repay after graduation.

Other possibilities include having the student contribute to an IRA, which won’t be counted in financial aid calculations, or transferring the student’s savings into a 529 account, which is treated as a parental asset even if it is in the student’s name.

If your family can afford it, another option may be to have the student forgo paid employment in favor of an unpaid professional internship that provides the type of work experience that will help after college. Of course, if the internship happens to pay, just use the strategies outlined here to protect the money.

4. Help From Relatives

A 529 account that a grandparent opens for a student isn’t counted as an asset, “but when the money is withdrawn to pay school expenses, this money is counted as income for the student,” Moon says. “So either way they get you.”

FAFSA considers financial support provided by anyone other than the student’s parents to be untaxed income to the student. The hit to financial-aid qualification from college expense contributions by grandparents or other relatives can therefore be significant. Of course, those contributions are effectively a form of financial aid and do help the student, just perhaps not as much as the adults trying to help would expect.

An alternative is to have grandparents contribute to a 529 that is in the parents’ name. Another option is for the student not to take any distributions from the grandparent-established 529 until after filing the last FAFSA of his or her junior year.

More Ways to Shield Assets
Some families might find the following strategies to be acceptable ways to keep their hard-earned assets instead of being required to contribute them toward the cost of their child’s college education. Others might see them as unethical, though it could be argued that they are no more unethical than taking income tax deductions. All of these strategies follow the rules, so feel free to employ whichever ones you are comfortable with that apply to your situation.

1. Save, Save, Save for Retirement

Experts always recommend that parents save for their own retirement before saving for their children’s college education because while children can borrow to pay for an education, parents can’t borrow (at least not enough) to fund their retirement. But another great reason for parents to put retirement savings first is that the money in a qualified retirement plan, such as a 401(k) or IRA, contributed before the tax year that coincides with your first FAFSA filing (called the base year) will be considered an asset and will not be counted toward your EFC. Contributions you make for the tax year that you report with the FAFSA, however, are considered untaxed income, so last-minute contributions won’t help your child qualify for more aid.

2. Pay Down Debt

If you have assets that colleges will expect you to spend to pay for your child’s college expenses but you’re also carrying debt, you might want to put extra money toward your credit card bills, auto loan and/or mortgage. That way you’re saving money on interest payments and potentially increasing your child’s financial aid eligibility. Even if you end up increasing your offspring’s eligibility for loans rather than grants, the student loans will likely have better terms than your credit cards or auto loans (though perhaps not better terms than your mortgage).

3. Cover Your Life

It’s always a good idea to make sure you have enough life insurance, and even though you have a child who is about to go to college, he or she, as well as younger siblings and your spouse, might still depend on your income or other contributions to running the household. You might want to use some of your savings to increase your life insurance coverage, ideally with an affordable term policy. If something happens to you, the money you spend on premiums will benefit your family more than putting those savings toward college would have.

4. Proceed with Planned Purchases and Upgrade Your Home

Don’t blow money on unnecessary purchases just to whittle down your savings to try to qualify for more aid, as such aid might come in the form of loans, and you might wish you’d held onto your cash instead. But it might make sense to go ahead and buy the new car or get the new roof you actually need sooner rather than later. Personal possessions such as automobiles, furniture, books, computers and jewelry aren’t factored into the FAFSA equation. A new roof might contribute to your home equity, which FAFSA also doesn’t count as long as the home is your primary residence. You could also move to a more expensive home or renovate your existing one. Other items you might consider purchasing are a computer your child can take to college or a used car that your child can drive to school and work.

Ethical Considerations
No one wants to pay more than they have to for anything, and if your child has been an excellent student and you’ve worked hard to help him or her succeed, you probably feel you deserve all the aid you can get as long as you play by the system’s rules. No one would encourage you to voluntarily pay more in taxes than you’re required to by law; they would tell you to take every deduction and use every tax avoidance strategy to which you’re legally entitled. So why are things any different when it comes to qualifying for college financial aid? Does it matter if you are violating the spirit of the rules even if you’re technically complying with them?

That’s up to you. But in one respect financial-aid ethics are crystal clear: “There is a difference between positioning income and assets to maximize aid eligibility – such as saving in the parent’s name instead of the child’s name and paying down debt – and lying about the existence of assets,” Kantrowitz says. “If you lie or mislead on the FAFSA, you can be subjected to a $20,000 fine and up to five years in jail, plus disgorgement​ of the aid. Moreover, some colleges will expel students who lie on the FAFSA.”

Some Steps to Building a Profitable Portfolio

In today’s financial marketplace, a well-maintained portfolio is vital to any investor’s success. As an individual investor, you need to know how to determine an asset allocation that best conforms to your personal investment goals and strategies. In other words, your portfolio should meet your future needs for capital and give you peace of mind. Investors can construct portfolios aligned to their goals and investment strategies by following a systematic approach. Here are some essential steps for taking such an approach.

Step 1: Determining the Appropriate Asset Allocation for You
Ascertaining your individual financial situation and investment goals is the first task in constructing a portfolio. Important items to consider are age, how much time you have to grow your investments, as well as amount of capital to invest and future capital needs. A single college graduate just beginning his or her career needs a different investment strategy than a 55-year-old married person expecting to help pay for a child’s college education and retire in the next decade.

A second factor to consider is your personality and risk tolerance. Are you willing to risk some money for the possibility of greater returns? Everyone would like to reap high returns year after year, but if you can’t sleep at night when your investments take a short-term drop, chances are the high returns from those kinds of assets are not worth the stress.

Clarifying your current situation, your future needs for capital, and your risk tolerance, will determine how your investments should be allocated among different asset classes. The possibility of greater returns comes at the expense of greater risk of losses (a principle known as the risk/return tradeoff) – you don’t want to eliminate risk so much as optimize it for your unique condition and style. For example, the young person who won’t have to depend on his or her investments for income can afford to take greater risks in the quest for high returns. On the other hand, the person nearing retirement needs to focus on protecting his or her assets and drawing income from these assets in a tax-efficient manner.

Conservative Vs. Aggressive Investors

Generally, the more risk you can bear, the more aggressive your portfolio will be, devoting a larger portion to equities and less to bonds and other fixed-income securities. Conversely, the less risk that’s appropriate, the more conservative your portfolio will be. Here are two examples: one for a conservative investor and one for the moderately aggressive investor.

Conservative portfolio
The main goal of a conservative portfolio is to protect its value. The allocation shown above would yield current income from the bonds, and would also provide some long-term capital growth potential from the investment in high-quality equities.

Moderately aggressive portfolio
A moderately aggressive portfolio satisfies an average risk tolerance, attracting those willing to accept more risk in their portfolios in order to achieve a balance of capital growth and income.

Step 2: Achieving the Portfolio Designed in Step 1
Once you’ve determined the right asset allocation, you need to divide your capital between the appropriate asset classes. On a basic level, this is not difficult: equities are equities and bonds are bonds.

But you can further break down the different asset classes into subclasses, which also have different risks and potential returns. For example, an investor might divide the equity portion between different sectors and market caps, and between domestic and foreign stock. The bond portion might be allocated between those that are short-term and long-term, government versus corporate debt and so forth.
There are several ways you can go about choosing the assets and securities to fulfill your asset allocation strategy (remember to analyze the quality and potential of each investment you buy – not all bonds and stocks are the same):

Stock Picking – Choose stocks that satisfy the level of risk you want to carry in the equity portion of your portfolio – sector, market cap and stock type are factors to consider. Analyze the companies using stock screeners to shortlist potential picks, than carry out more in-depth analysis on each potential purchase to determine its opportunities and risks going forward. This is the most work-intensive means of adding securities to your portfolio, and requires you to regularly monitor price changes in your holdings and stay current on company and industry news.
Bond Picking – When choosing bonds, there are several factors to consider including the coupon, maturity, the bond type and rating, as well as the general interest-rate environment.
Mutual Funds – Mutual funds are available for a wide range of asset classes and allow you to hold stocks and bonds that are professionally researched and picked by fund managers. Of course, fund managers charge a fee for their services, which will detract from your returns. Index funds present another choice; they tend to have lower fees because they mirror an established index and are thus passively managed.
Exchange-Traded Funds (ETFs) – If you prefer not to invest with mutual funds, ETFs can be a viable alternative. ETFs are essentially mutual funds that trade like stocks. They’re similar to mutual funds in that they represent a large basket of stocks – usually grouped by sector, capitalization, country and the like. But they differ in that they’re not actively managed, but instead track a chosen index or other basket of stocks. Because they’re passively managed, ETFs offer cost savings over mutual funds while providing diversification. ETFs also cover a wide range of asset classes and can be useful for rounding out your portfolio.
Step 3: Reassessing Portfolio Weightings
Once you have an established portfolio, you need to analyze and rebalance it periodically, because market movements may cause your initial weightings to change. To assess your portfolio’s actual asset allocation, quantitatively categorize the investments and determine their values’ proportion to the whole.

The other factors that are likely to change over time are your current financial situation, future needs and risk tolerance. If these things change, you may need to adjust your portfolio accordingly. If your risk tolerance has dropped, you may need to reduce the amount of equities held. Or perhaps you’re now ready to take on greater risk and your asset allocation requires that a small proportion of your assets be held in riskier small-cap stocks.

To rebalance, determine which of your positions are overweighted and underweighted. For example, say you are holding 30% of your current assets in small-cap equities, while your asset allocation suggests you should only have 15% of your assets in that class. Rebalancing involves determining how much of this position you need to reduce and allocate to other classes.

Step 4: Rebalancing Strategically
Once you have determined which securities you need to reduce and by how much, decide which underweighted securities you will buy with the proceeds from selling the overweighted securities. To choose your securities, use the approaches discussed in Step 2.

When selling assets to rebalance your portfolio, take a moment to consider the tax implications of readjusting your portfolio. Perhaps your investment in growth stocks has appreciated strongly over the past year, but if you were to sell all of your equity positions to rebalance your portfolio, you may incur significant capital gains taxes. In this case, it might be more beneficial to simply not contribute any new funds to that asset class in the future while continuing to contribute to other asset classes. This will reduce your growth stocks’ weighting in your portfolio over time without incurring capital gains taxes.

At the same time, always consider the outlook of your securities. If you suspect that those same overweighted growth stocks are ominously ready to fall, you may want to sell in spite of the tax implications. Analyst opinions and research reports can be useful tools to help gauge the outlook for your holdings. And tax-loss selling is a strategy you can apply to reduce tax implications.

Remember the Importance of Diversification.

Throughout the entire portfolio construction process, it is vital that you remember to maintain your diversification above all else. It is not enough simply to own securities from each asset class; you must also diversify within each class. Ensure that your holdings within a given asset class are spread across an array of subclasses and industry sectors.

As we mentioned, investors can achieve excellent diversification by using mutual funds and ETFs. These investment vehicles allow individual investors to obtain the economies of scale that large fund managers enjoy, which the average person would not be able to produce with a small amount of money.

Financial Tips For Young Adults

Unfortunately, personal finance has not yet become a required subject in high school or college, so you might be fairly clueless about how to manage your money when you’re out in the real world for the first time.

To help you get started, we’ll take a look at eight of the most important things to understand about money if you want to live a comfortable and prosperous life.

Learn Self-Control
If you’re lucky, your parents taught you this skill when you were a kid. If not, keep in mind that the sooner you learn the fine art of delaying gratification, the sooner you’ll find it easy to keep your finances in order. Although you can effortlessly purchase an item on credit the minute you want it, it’s better to wait until you’ve actually saved up the money. Do you really want to pay interest on a pair of jeans or a box of cereal?

If you make a habit of putting all your purchases on credit cards, regardless of whether you can pay your bill in full at the end of the month, you might still be paying for those items in 10 years. If you want to keep your credit cards for the convenience factor or the rewards they offer, make sure to always pay your balance in full when the bill arrives, and don’t carry more cards than you can keep track of.

Take Control of Your Own Financial Future
If you don’t learn to manage your own money, other people will find ways to (mis)manage it for you. Some of these people may be ill-intentioned, like unscrupulous commission-based financial planners. Others may be well-meaning, but may not know what they’re doing, like Grandma Betty who really wants you to buy a house even though you can only afford a treacherous adjustable-rate mortgage.

Instead of relying on others for advice, take charge and read a few basic books on personal finance. Once you’re armed with personal finance knowledge, don’t let anyone catch you off guard – whether it’s a significant other that slowly siphons your bank account or friends who want you to go out and blow tons of money with them every weekend. Understanding how money works is the first step toward making your money work for you.

Know Where Your Money Goes
Once you’ve gone through a few personal finance books, you’ll realize how important it is to make sure your expenses aren’t exceeding your income. The best way to do this is by budgeting. Once you see how your morning java adds up over the course of a month, you’ll realize that making small, manageable changes in your everyday expenses can have just as big of an impact on your financial situation as getting a raise.

In addition, keeping your recurring monthly expenses as low as possible will also save you big bucks over time. If you don’t waste your money on a posh apartment now, you might be able to afford a nice condo or a house before you know it.

Start an Emergency Fund
One of personal finance’s oft-repeated mantras is “pay yourself first.” No matter how much you owe in student loans or credit card debt, and no matter how low your salary may seem, it’s wise to find some amount – any amount – of money in your budget to save in an emergency fund every month.

Having money in savings to use for emergencies can really keep you out of trouble financially and help you sleep better at night. Also, if you get into the habit of saving money and treating it as a non-negotiable monthly “expense,” pretty soon you’ll have more than just emergency money saved up: you’ll have retirement money, vacation money and even money for a home down payment.

Don’t just sock away this money under your mattress; put it in a high-interest online savings account, a certificate of deposit or a money market account. Otherwise, inflation will erode the value of your savings.

Start Saving for Retirement Now
Just as you headed off to kindergarten with your parents’ hope to prepare you for success in a world that seemed eons away, you need to prepare for your retirement well in advance. Because of the way compound interest works, the sooner you start saving, the less principal you’ll have to invest to end up with the amount you need to retire and the sooner you’ll be able to call working an “option” rather than a “necessity.”

Company-sponsored retirement plans are a particularly great choice because you get to put in pre-tax dollars and the contribution limits tend to be high (much more than you can contribute to an individual retirement plan). Also, companies will often match part of your contribution, which is like getting free money.
Get a Grip on Taxes
It’s important to understand how income taxes work even before you get your first paycheck. When a company offers you a starting salary, you need to know how to calculate whether that salary will give you enough money after taxes to meet your financial goals and obligations. Fortunately, there are plenty of online calculators that have taken the dirty work out of determining your own payroll taxes, such as Paycheck City. These calculators will show you your gross pay, how much goes to taxes and how much you’ll be left with, which is also known as net, or take-home pay.

For example, $35,000 a year in New York will leave you with around $26,399 after taxes without exemptions in 2016, or about $2,200 a month. By the same token, if you’re considering leaving one job for another in search of a salary increase, you’ll need to understand how your marginal tax rate will affect your raise and that a salary increase from $35,000 a year to $41,000 a year won’t give you an extra $6,000, or $500 per month – it will only give you an extra $4,144, or $345 per month (again, the amount will vary depending on your state of residence). Also, you’ll be better off in the long run if you learn to prepare your annual tax return yourself, as there is plenty of bad tax advice and misinformation floating around out there.

Guard Your Health
If meeting monthly health insurance premiums seems impossible, what will you do if you have to go to the emergency room, where a single visit for a minor injury like a broken bone can cost thousands of dollars? If you’re uninsured, don’t wait another day to apply for health insurance; it’s easier than you think to wind up in a car accident or trip down the stairs.

You can save money by getting quotes from different insurance providers to find the lowest rates. Also, by taking daily steps now to keep yourself healthy, like eating fruits and vegetables, maintaining a healthy weight, exercising, not smoking, not consuming alcohol in excess, and even driving defensively, you’ll thank yourself down the road when you aren’t paying exorbitant medical bills.

Guard Your Wealth
If you want to make sure that all of your hard-earned money doesn’t vanish, you’ll need to take steps to protect it. If you rent, get renter’s insurance to protect the contents of your place from events like burglary or fire. Disability-income insurance protects your greatest asset – the ability to earn an income – by providing you with a steady income if you ever become unable to work for an extended period of time due to illness or injury.