Advice That is “Money”

I read a statement in a book called, The DNA of Prosperous People recently which solidified what I already knew. The author, Rickey Johnson states, “No one achieves greatness by himself or herself. A smart businessperson will search for a teacher or someone to provide the steps to achieving success.”

I was taught this concept quite a while ago, but I wanted to encourage you to do the same. Mentors are such important players for our individual success. Not only do they help us, but they give us an opportunity to potentially help them. Serving others is an important part of why you’re here on Earth.

Personally, I ask for references and pursue new contacts via an introduction from a friend or a simple email straight to the person I’d like to meet, asking for an informational interview on the phone. Recently, that has led me to have lunch with businesspeople in my intended field who are excited to generously dole out advice and lead me to others.

To every phone call or lunch meeting, I come armed with a series of questions. Before any meeting, I spend some time looking these individuals up on LinkedIn, university databases and anything else I can come up with from a Google search. I prepare some questions to show that I’ve been thoughtful and intentional with their time. I also try to direct the conversation to minimize any awkward silences.

These are the questions I ask:

“What steps did you take in order to achieve your goals / secure your position in ___ company?”

“What skill set do you wish you would have developed before starting your job?”

“What contributed most to your success?”

“What industry groups/ networks are you involved in? How have they helped you?”

If the meeting leads to a great connection and friendship, I put these people in a database to keep my contacts organized for future purposes. I lead others to them and I lead them to others whom they might need in the future.

Drawing wisdom and experience from others is an important task. Expanding your network is another key to your success. If nothing else, you have another friend (and that is not to be understated). It’s important to have an intelligent group of people surrounding you who can help you, and most importantly, who YOU can help. 

Another Resource - BankRate.com

I’ve mentioned this website time and time again, so this shouldn’t sound new to you. Add www.BankRate.com to your toolbox of resources.

What is it?

BankRate.com is a non-biased resource on where to find checking accounts and CDs, savings accounts and money market accounts with the best rates around. Type in a product you’re looking for (e.g. “credit card”), and the website will ask you about the various characteristics you’d like on that product. It will then generate a list of products so that you can compare them. It’s a great research tool. I used it to find the credit card I have in my wallet currently.

It simplifies life a bit, as it allows you to make an objective decision among the choices available without hitting you with constant advertising.

Enjoy this resource!

Savvy with Certificates of Deposit (CDs)

In the last post, I mentioned using certificates of deposit as a way to save for either needed or wanted purchases. Certificates of deposit are just one of the tools you can use to invest your money.

What is it? It’s a time-based account offered by every bank that pays a slightly higher interest rate than do savings accounts or checking accounts. The only caveat with CDs is that they “lock” up your money for a certain amount of time. CDs can lock your money in for 3 months, 6 months, 1 year or even 5 years. Those are not the only time periods involved; they are simply examples.

Go to www.BankRate.com to find and compare CDs among several banks, states and credit unions. The rates are not as high as they used to be, but you’ll earn interest on your money nevertheless.

LearnVest.com has a great and easily-digestible article about CDs. Check out this website:

http://www.learnvest.com/money-tuneup/the-cd-a-users-guide/

Also, as LearnVest describes, there are often penalties for accessing your money before the “due date” (maturity date) of your CD. Investing in a CD means that you cannot access that money until the set due date. That fact makes CDs a less liquid investment. This means that you cannot easily access the cash that is in the certificate of deposit. A checking account is very liquid because you just go to an ATM and withdraw the amount of money you need from it at any given time. Not so with a CD.

Note: LearnVest, other financial websites such as Suze Orman’s YF&B, and I agree on one fact: You should not start investing until you have paid a serious amount off (or the entire balance off) of credit card debt AND have started an emergency fund. See earlier posts about the need for an emergency fund and what that fund entails.

So, at this point, you may find yourself saying, “I have some extra cash that I don’t mind locking up for a few months. I want to see how this CD thing works. But how do I do that?” You walk into your bank during normal business hours. You tell the teller, “I want to open a certificate of deposit.” The teller will most likely take you to a personal banker to talk about the CD, make sure you understand the rules and the fine print, and then will open up a CD for you. You write the check or transfer the cash from one bank account to a CD. Take the paperwork, file it away, and boom! You have just invested your money! Make SURE you have reviewed the bank’s investment fine print (available online) on your own. Come into the bank knowledgeable about the product. Make sure you read at least a few articles about CDs and go to BankRate.com to research the best interest rates offered on the market. Ready, set, invest!

Fun With Funds!

When I was in college, part of my financial aid package was that the school offered me a work-study job on campus. I could earn up to a certain dollar amount in an on-campus job. With my measly paycheck every two weeks, I decided to work on financial discipline. I went to a school where designer daddy-bought handbags were an everyday sighting. Haute couture was at every hallway’s turn. So one night while procrastinating school assignments, I went on a website that sold luxury handbags…just to look. I printed the picture and description from my favorite handbag on the website. I calculated the price of that handbag plus Los Angeles sales tax, and I taped that number to my desk in my room.

With every paycheck, I put a predetermined dollar amount away in a separate savings account which earned interest (albeit, not much). Once that account reached my calculated handbag total, I withdrew the entire amount and bought the handbag!

NOT!

I totally did not buy the handbag. I took the money and invested it in a 6-month certificate of deposit (CD). Then I went back to the handbag website and did it all over again. My friends called my crazy. My mother called me confused. I called it disciplined. Technically, I bought that handbag and several others! But I didn’t actually purchase the purse because purses in your closet do not produce income. Purses in your closet take up space. Certificates of deposit produce interest income and they gave me the same level of satisfaction as buying the handbag.

I don’t deprive myself now (because I work hard at a job and I let myself indulge at times). But those initial “experiments” helped me to develop financial discipline and to value interest-bearing investments rather than giving in to every fashion desire.

In one of the personal finance books I’m currently reading, Living on a Budget, the authors extol creating separate funds (savings accounts or CDs) that you set aside and pour small amounts of money into at regular time intervals. These funds help you to plan for and pay for future expenses – both necessities AND wants.

A good way to utilize a separate fund is to plan for property taxes. For example, put a pre-specified amount of money away each month for property taxes if you own your residence. Property taxes are calculated as 1.25% of the market value of your home. So when property tax time comes around, you won’t feel the hit or the drain on your paycheck or main savings account. You’ve planned for it, you’re ready for it and you can afford it without altering your lifestyle!

Checking Account? Check!

I mentioned that I started using a financial bootcamp offered by LearnVest, a financial literacy website. You can find bootcamps and a ton of other information on their website: www.learnvest.com.

One of the topics was particularly important, and I have overlooked it while writing these posts. It’s a simple topic: what you should look for in your checking account! I’ll detail out their advice and some of my own (gathered from books, of course). And at the end of this post, I have a little suggested reading for you. Enjoy!

You should ensure your checking account can boast of the following:

1. No fees!!! No fees when you make a withdrawal. No fees annual fees to keep your checking account open (suggested by LearnVest).

2. Many ATMs nearby (suggested by LearnVest). These ATMs should not charge you to withdraw cash. This money adds up and is a complete waste.

3. FDIC insurance coverage (suggested by LearnVest). This insurance covers up to $250,000. Find out more about FDIC insurance coverage at this website: http://www.fdic.gov/deposit/difaq.html.

4. Online banking to monitor your account.

One particularly important point about checking accounts as suggested by LearnVest: your checking account should not be where you store large sums of money because it doesn’t earn significant interest. It should just house small amounts of money that you need to keep on-hand. You should choose interest-bearing savings accounts for large sums, or even investment vehicles to house your money.

You can find the checking account that suits your criteria on BankRate.com: http://www.bankrate.com/checking.aspx.

For those of you who like to read, or realize that reading is useful to your intellect and financial wellbeing, I recommend that you check out a couple books that are out there right now. I really found Personal Finance in Your 20s to be very useful. It’s part of the “For Dummies” series. Although the title may be partially self-deprecating, the information between the covers is valuable and applicable to what recent college grads will be facing over the next decade of their lives. 

"And Do You Have an Account with Us?"

All about department store credit cards...

By request, today’s post will discuss why department store credit cards may or may not be the best type of plastic for you. Have you ever been offered an opportunity to shave off 15% or 20% of your first purchase with a newly-opened department store credit card? Though these cards do come with perks, let’s look into this credit card type more closely.

As a general rule of thumb, opening several (or even as much as 2) credit lines at one time or within the same general time period may lower your credit. Credit bureaus may question why you need that much capital (money) available to you all of the sudden and may perceive you as a higher-risk person, lowering your credit score as a result.

You should also know that department store credit cards, though attractive on account of the initial discount they come with, can be the most expensive way to pay for something. Especially if you don’t pay off your entire balance once the bill is due. Many department store credit cards charge as much as 26% interest! And this is for people with good credit!

If you pay your entire credit card balance each month (a HIGHLY recommended and HIGHLY responsible practice…), the interest rate shouldn’t bother you because you’ll never be paying it. But if you choose to finance your purchases from Macy’s or Bloomingdale’s or other retailers, be prepared to see big numbers representing the interest you’re paying on that purchase. In my opinion, this is a stupid practice and one that you should avoid.

Having a big credit line open at Nordstrom or some other retailer could help your credit score, too. Let’s say you have a credit line of $5000 open and available at a retailer. You charge your Christmas purchases and immediately pay off the balance once the bill comes, making your $5000 available to you again (this is called “revolving your debt”). This will improve your debt-to-limit ration. That means that the debt you have outstanding on all credit cards, car loans, mortgages, etc…has decreased.

Here’s an example. I have 3 credit cards with a total limit of $15,000. Let’s say I have $300 in balances that I have to pay off. I open another credit card for $3,000 and now my total limit is $18,000, but my balance is the same. So my debt-to-limit ratio is better at 300/18,000 (0.017) versus my old debt-to-limit ratio of 300/15,000 (0.02). This shows I am less risky with more of a limit and the same or less debt. This does NOT mean that you should go and open more credit cards. Stick with what you have and pay down your balances to 0.

Scenario 2: Let’s say I have 3 credit cards with a total and combined limit of $15,000. I am having trouble paying down my balance of $800. My interest rates are between 20% and 26%, however, so I know I need to pay these cards down. Instead of paying more money than usual to my student loans that only have a 6% interest rate, I pay off as much as I can on these cards. This month, my balance falls to $400 (yay!). So my new debt-to-limit ratio is 400/15,000 (0.027) which is much better than the old debt-to-limit ratio of 800/15,000 (0.053). Credit bureaus look at this and smile. And as a result, your credit score improves.

Read Suze Orman’s The Money Book for the Young, Fabulous and Broke for more information. 

Have You Heard?

I was recently told about a wonderful company online called LearnVest.com. Founded by a Harvard alumna, its mission is to make information and tools for personal finance readily available for women. I believe, however, that this website could help both men and women tremendously.

My favorite feature on the website (one of SEVERAL features) is the online bootcamp programs. Some of the programs are free, and some cost $14.99. They vary in topics from beginner's basics to getting out of debt to living frugually. Daily blurbs, action plans and to-do lists are emailed to you on your topic of choice once you enroll. I enrolled in the free bootcamp called "Personal Finance Basics," and I'll post my reviews once I've completed it.

The website also boasts of powerful tools such as the credit card finder, monthly payment calculators for simple loans and mortgages, retirement calculators and plenty of articles on important and fun topics (e.g,. party planning on a budget or how to get freebies all over town).

Be forewarned, however. Part of LearnVest's business model is affiliation fees paid by companies such as TD Ameritrade and other retailers who advertise on or obtain patronage from LearnVest users. This website is geared towards women in their early 20s and LearnVest's advertisers and affiliates are leveraging their exposure accordingly. Before you shovel your money into an "LV approved account" or apply for an "LV approved credit card", be sure to check BankRate.com for information on these accounts, cards or investment vehicles.

Here's the website! Now go get smarter!
http://www.learnvest.com/

Where Does My Money Go?

We’ve touched on tracking your expenses on a monthly basis to estimate how much you should realistically allocate to each category of your budget (food, housing, student loans/ debt, clothing, entertainment, etc…). In her book, The Money Book for the Young, Fabulous & Broke, (I know, laugh it up…!) Suze Orman offers a powerful tool to track your monthly expenses by category that will take the guess work out of it. The link to this PDF file is below.

http://www.suzeorman.com/downloads/CashFlowWorksheet.pdf

If for some reason the link doesn’t work, go Orman’s website: http://www.suzeorman.com/igsbase/igstemplate.cfm?SRC=SP&SRCN=yfb1&GnavID=21&SnavID=59&TnavID= and search “cash flow worksheet.” This will download a document to track your income and expenses, and will let you visualize where your money flows each month (or each week, if you’d like).

This is a powerful tool to get a rein on your expenses or to observe your spending habits. If you’ve ever been on a diet and used (or heard of people using) food journals to track what they eat, you know that using this tool will make you think twice, if not seven times, before the next time you spend money on non-essentials. Just having to write it down makes a difference.

Rules accompany using this worksheet.

1)   Be honest with yourself. Don’t curb your spending during the month you track your expenses. Don’t go spending crazy, either! The goal is to get a realistic and representative snapshot of your monthly spending habits.

2)   Keep your receipts and file them away (if they’re debit or credit card purchases). I keep all my receipts and file them by month, anyway. This makes it easy to find a receipt for an electronic item that broke (a phone, or an iPod, for example) and will help take the stress out of proving a warranty that’s still in effect. Just a thought…

3)   Take action once you’ve recorded your expenses by category! Create a monthly budget! Aim to NOT meet the budgeted dollar amount allocated to some items. I’m not recommending deprivation. I’m just recommending reining in expenses so that you can do more responsible things with that money! And trust me, we’ll get into allocating responsibly in the weeks to come.

Spending problem? You don't need a 12-step program!

Before we expand on any further budgeting tools, I’m going to give you some tips on how to better discipline yourself, in terms of spending. I’m also going to assume that you all have spending problems without the incomes to support those habits…(I can identify!).

1. Situation: You’re in a store and you see something you must have. You grab it and approach the check-out counter. Or you grab and hold on to it, looking for other items to add to the impulse basket. Peter and Jennifer Sanders offer this bit of advice in their book, “Living on a Budget” for such a situation: Delay the purchase for 1 week and see if you lose interest in the item. This is painful (especially for me), but extremely cost effective! I’ve actually done this twice already and saved myself a lot of money by not giving in to the temptation to spend.

2. Cut your television consumption by ½. Also, for some of you, a painful piece of advice. But you MUST become aware NOW of the myriad product placement strategies that networks employ. Not to mention, advertisements and commercials are extremely persuasive these days. For example, I did not know that I absolutely needed an iPad until last week! Thank you, strategic advertising, for making me aware of my lack! If you reduce your TV consumption, you reduce advertisers’ power over your emotions and your wallet. And you save yourself from permanent brain rot.

3. Resist the urge to “fritter away” money. What does this mean? If you total your 4 trips to Yogurtland this week, your coffee consumption, packs of gum every time you fill up on gas or go to the grocery store, or make other small purchases, two things happen. A) You make business owners VERY happy because they make money on high-margin items.

(High margin à e.g. A pack of gum costs me $0.20 to purchase, and I sell it to customers for $1.89. I have just made $1.69 on your inability to resist the urge to buy gum from a cheaper retailer.)

B) Your small purchases add up very quickly to total a large chunk of money spent irresponsibly. I’m guilty of this too often! But let’s work together to cure “financial stupid-itis”!

And now for something a little different...

We’ve been dwelling on credit cards for several posts now. So many financial planners and personal finance authors classify credit card usage as potential financial disaster. Credit cards are also, often times, the most expensive way to pay for something! In this post, I’ll present an introduction to budgeting and goal setting – powerful tools to help you avoid overusing your credit card. These guidelines can also help you get a grip on your financial situation. Most of the information in this post is taken from Peter and Jennifer Sander’s book, “Living on a Budget”. 

Budgeting, if done well, can be your KEY to financial security. It can help you achieve your financial goals like a professional. Budgeting requires incredible discipline and wisdom; this shouldn’t be frightening. This should be encouraging! Budgeting and goal setting will, in effect, help you sharpen your character AND your financial stability. It has helped me (goal setting, in particular) pay off a good chunk of student debt, pre-pay a European vacation, invest well and build a satisfactory retirement fund, for my age at least. It’s even helped me achieve the little things, like paying for all my family’s Christmas gifts by June so that I don’t feel the pinch in December.

First, you need to keep a close eye on your income and your expenses. I suggest tracking how you spend for 1 month. Personally, I record everything I buy/ spend money on in my planner. Some of you might think this is archaic. No, I don’t use an electronic calendar. Physically crossing off my to-do’s in my calendar is a simple joy in my life! You can adopt any system you’d like. If you want to write all your expenses on napkins and file them away in a shoe box, be my guest. Just make it so that you can go back to your files once the month is over, and total the amount.

You may consider splitting your expenses into categories: food, clothing, room/board, utilities, monthly debt and entertainment, for example. Categorize your expenses, total them, and analyze. Allot yourself a realistic budget for each category. As a rule of thumb, rent/ mortgage payments should not exceed 30% of your take-home pay.

The tracking tool is powerful because it can really make you aware of where your spending pitfalls lie and where you can better discipline yourself.

No more information in this article. I don’t’ like overwhelmed readers. I hope you start tracking your expenses today and we can expand on the next steps in the coming week! 

The Emergency Fund: What it is and why you need it

Emergencies – never fun events to plan for!

Everyone knows emergencies of some sort MIGHT happen, but thinking about them is a little depressing, don’t you think?

But I will tell you this: the smartest people in the room are the ones who plan for financial emergencies.

I’m going to explain to you the purpose, the components and the benefits of the emergency fund.

The title doesn’t hide the purpose.

An emergency fund, also called the "emergency cash fund" by some financial planners, is a rainy day fund to cover all your unknown expenses that always seem to hit at the wrong time.

Ideally, your emergency fund would be enough to pay for at LEAST six months of your living expenses. Cash should be your first line of defense against any emergency expenses – if you use a credit card, you’ll run the risk of incurring interest payments which will dig you into a deeper financial hole. 

Give yourself TIME to stash away the necessary amount. Personally, I was able to accumulate an emergency fund by taking a certain, pre-calculated amount from each paycheck, and depositing it into a certain interest-bearing savings account. Using a CD for such a fund is not recommended because you’re going to want to have complete access to it without incurring any penalty fees for withdrawing before the CD maturity date.

Also, timing is really important: you should concentrate on building an emergency fund when you have you credit cards, mortgage payments, or in my case, student loans under control. This is probably not a feasible financial step if you don’t yet have enough to live on, or you’re not done paying down your highest interest credit cards or debt. This should be a medium-term goal (1-5 years) to help you achieve a little financial security.

Benefits:

Let’s say you are laid off from your job – a situation not unlikely in today’s economic landscape. Your emergency fund can be used to keep you afloat by covering rent or your home mortgage. Let’s say you get into a car accident; your emergency fund can be used to pay your deductible in such an instance.

In my case, I left my job. However, I overestimated the amount of money I would need to keep me afloat during my time of unemployment. But with my emergency fund, I didn’t have to completely cut out eating out at restaurants because I planned for it in advance and stashed it away in the emergency fund.

Other benefits include: financial peace of mind and a greater net worth. You can sleep well without worrying that if unexpected, large expenses presented themselves, you would be able to pay for them.

You accumulate greater net worth because if you build up savings, and have more cash set aside, this lowers the ratio of debt to equity and makes you look like a champ if you ever need to borrow from a bank or other lending institution.

In action: 

Put away $100 per month at 2% interest and in 3 years, you’ll have $3,700; in 7 years you’ll have over $9,000!

Put away $200 per month at 2% interest and in 3 years, you’ll have $7,400; in 7 years you’ll have $18,000!

Put away $250 per month at 2% interest and in 3 years you’ll have $9,200 and in 7 years, you’ll have $23,000!

Just a little bit each month in an interest bearing account and you’ll enjoy a bit of calm when unexpected expenses present themselves.

How to Build Your Credit

I was blessed to have parents who were very responsible when it came to using credit lines and credit cards. They paid their payments on time and didn’t like to have a balance on any revolving credit (a credit card or line of credit from a bank). When I was of age, they put my name on their credit card so their good habits would help to build up my credit score and history. I realize that not many of us have had that opportunity. Here are some tips from various sources that can guide us in building up a good credit score.

From an article by Jilian Minger entitled, “Credit-Score Pitfalls of the Wealthy”, the author advises that “about 35% of the score comes from a person’s payment history. Paying on time helps raise the score, while late payments, lines and bankruptcies will reduce it.”

She also mentions that about 30% of one’s credit score is based on how much someone owes. So common sense leads us to believe the lower the amount of debt, the better.

In addition, the older the credit card or line of credit, the better. Ten percent of the credit score is based on what type of debt you have. Types include mortgages (some of us are there yet, but most of us aren’t), department store credit cards, student loans or auto loans (installment debt). According to the article and Suze Orman’s The Money Book from the Young, Fabulous and Broke, installment loans and mortgages are better for your credit score than just having a retailer credit card (or twenty retailer credit cards…!).

A great resource for researching more about your credit score is Fair Isaac’s website, www.myfico.com.

To build up your score, request a copy of your credit report from each of the three major credit reporting agencies. Better yet, use the website www.annualcreditreport.com instead of the individual websites to get your free reports.

Also according to the article, pay down your credit card debt completely every month. This is a sound financial habit. If you’re currently unable to do that, pay it down to less than half the available balance every month. Not doing so can really cause your credit score to fluctuate.

Here are additional “don’ts” to help your credit score, per the article:

1. Don’t consolidate your debt on another card unless the interest rate is significantly lower and you plan to pay off the entire amount in one year.

2. Don’t cancel your card once you’ve paid it down because the score considers longevity and availability of credit.

3. Don’t stop using credit cards altogether. Many individuals just pay cash and have been taught that credit card usage is evil. However, to build up your score, you need to have a usage history. Even if you just use it once a year and pay it down immediately, having a payment history can be beneficial to you once you apply for a home or car loan. It gives the lenders (usually banks) an idea of how responsible (or not) you are with credit. 

Credit Cards - A Topic Worth Dwelling On

I mentioned several terms in the last post which I’d like to define in case there’s any confusion.

GRACE PERIOD  (As defined by the book The Money Book for the Young, Fabulous and Broke – Orman) – “The period between the end of your billing cycle and the day your payment is due; you will incur no interest charges during this period. If you carry over a balance from a previous month, there is no grace period…Credit card companies love to shorten the grace period; always check your payment due date when you receive your statement to make sure you know when you need to get the payment in to avoid interest charges.”

For example, on a credit card I have, my billing cycle ends on the last day of the month, and my bill is due on the 18^th of each month. Per the instructions above, always check to see if they shortened your grace period, and in effect, demand payment from you sooner.

Another piece of awesome advice from the aforementioned book:

If you have multiple credit cards that all carry a balance, concentrate on the card with the highest INTEREST RATE (not the largest balance). An effective technique is to list the credit cards in order of interest rate – highest to lowest – write down the minimum and maximum your credit card company is asking you to send in, and pay as much as possible over the minimum amount on the credit cards with the highest interest rate. The book suggests at least $50 dollars over the minimum amount you must pay on the highest interest rate credit card.

Keep paying the monthly minimum on the lower interest rate cards until the highest interest rate cards are paid off. Do this for each card until the balances are gone.

I found this advice in particular to help so much in prioritizing which student loans and credit cards to concentrate on! Remember to check out www.bankrate.com as your go-to resource for credit-related information.

Credit Cards - Which one is right for me?

In the personal finance book The Money Book for the Young, Fabulous and Broke, which I highly recommend everyone under the age of 30 to own and re –read three times, the author gives some great points on how to choose a credit card that’s right for you.

The bottom line is that you need to build credit, so you should have your name on a card. This blog is JUST an introduction to the topic. In future articles, I’ll expand on the topic since there are several important points.

First, some quotes from the chapter that will set the tone:

“If you think you are entitled to use your credit cards for blowout vacations, a closet full of expensive clothes, and going out four times a week, you are financially deranged.”

My addendum: “It’s also not a smart move to pay for rent using credit card checks; that’s a sure sign that you can’t afford where you’re living currently and that your desires are not practical at the moment.”

So how do I choose the credit card with the best deal?

“If you’re going to use your credit cards to live on, you can’t afford to spend a penny more than necessary in interest rates and fees.” However, if you use your credit cards to rack up points and flyer miles, and pay off the balance in total on each bill, the rate doesn’t really matter. But BE SURE to make that an inflexible habit. Always remember, the money you are paying in interest if you leave a balance on your credit card is the companies’ way of robbing you of what you need to spend on gas or student loan payments!

Other factors to consider:

Is there an annual fee? How much?

What is the interest rate? How much has it increased in the past 3 years?

What is the grace period to pay the bill?

Are there any fees or penalties levied for late payments?

What are the rewards that would most benefit me? Cash back? Frequent flier miles? Gas?

THE FINALE: this is your go-to resource for credit card research, comparison and information.

http://www.bankrate.com/credit-cards.aspx

Apartment Hunting? Know This!

Apartment Hunting? Know this!

For the newly-graduated demographic, apartment hunting and leaving the nest could just be your next step in life. Say you secured a job and need to shorten the commute. Say you can’t stand to live with your parents anymore. Whatever the case may be, you’re in the market for a new apartment and on your way to new (and expensive) freedom!

According to an article in last week’s Bloomberg Businessweek, demand for apartments, and apartment rents, are both set to rise over the next three years. Read below to find out why, and how this change can affect you.

The national foreclosure rate for the fourth quarter of 2010 (October – December) was 4.63%. That means that thousands of people in our nation were kicked out of their homes as they defaulted (couldn’t pay) on their mortgages for several consecutive months. These foreclosures helped drive people out of the homeowner/ homebuyer market and into rentals. As you may recall from any economics course, when demand skyrockets, so do prices.

Some apartment prices could also be higher as apartment owners hike up the price to make up for losses they’re experiencing on some of their vacant apartments and properties. In effect, you might be charged more for rent simply because you’re helping owners keep their rental incomes steady if some of their properties are not currently rented or leased. It’s a business, after all.

In the early 1930’s, the Rothchild Family convinced the American people through highly effective campaigns that the “American Dream” is to be a homeowner. Thus, citizens could own their own piece of America and exercise full autonomy on their plot(s) of land. This occurred much in the same way that Debeers (the world’s largest diamond company) convinced the American people in the early twentieth century through again, highly-effective campaigns, that a diamond engagement ring (…and a BIG one) was the only way to express a man’s intention to make a woman his bride. Needless to say, in America currently, you’re considered socially-accepted and successful if you’re wearing a big rock and you own a home. No wonder.

Why do I mention this? After the median (middle) home price plummeted 27 percent in the last 5 years, some Americans no longer consider homeownership “the American dream”. Your investment would be solid, because home prices can only rise! If you’ve read Robert Kiyosaki’s Rich Dad, Poor Dad, however, homeowners might consider themselves the American suckers, rather than those who realized their own dreams. I don’t mean to be disparaging, but if you paid $1.4 million for your house, which is now worth $900K, and you want to sell your home, you’ll be taking a huge loss. Thus, the sucker punch. The drop in the prices (or values) of homes are driving people to rent, according to the article entitled, “Apartments Are on the Rise Again.” They’ve lost money on their investment (their homes), and who knows if the prices will ever rise again to the amount they paid. This will contribute to the upswing in demand for apartments.

So we understand that demand is climbing. Please understand also that supply is not climbing quickly enough to meet the 1 million additional renters per year. “New rental apartment construction plummeted to a 50-year low”, according to the Census Bureau Report, and current apartment construction is the slowest since 1959.

AvalonBay Communities, one of the largest public U.S. apartment homeowners, stepped up its new apartment building efforts, as they reasoned that since rents will increase, their costs will stay unchanged. Since materials costs are rising and rental rates are increasing (remember demand…!), the overall effect on net profit is steady. The Company started 11 new developments in 2011, which will undoubtedly help with the supply shortage. 

What's Changing During Tax Season?

Tax laws are complex and always changing. With any new administration, tax laws are adjusted that either ease the burden of the lower and middle classes (albeit very temporarily) or strengthen the tax shelter of the wealthy. In an article from the Wall Street Journal on February 7, 2011, many of the amendments that were made last year are set to expire in 2012. Therefore, in regards to tax law, always keep in mind that is like an energetic toddler, always moving and never consider one of life’s constants.

This year’s tax rates, per the Journal’s article, are listed below:

*Note: Single taxpayer rates are listed first, and married taxpayers rates are presented in parentheses.

Up to $8,500 (up to $17,000) à 10%

Up to $34,500 (up to $69,000) à 15%

Up to $83,600 (up to $139,350) à 25%

Up to $174,400 (up to $212,300) à 28%

Up to 379,150 (up to $379,150) à 33%

Above $379,150 à 35%

Notice the biggest jump in tax rates is when you cross the $34,500 mark as a single taxpayer, or the $69,000 mark as married taxpayers. That’s about the mark of lower-middle or middle class. Thus, the uproar that the middle class is the body most reprimanded for earning a higher income from one year to the next.

If you have investments and have to pay taxes on capital gains because you sold stocks or bonds this year (assuming the price of your security increased), the rates are at an all-time low. For taxpayers in the 15% tax bracket and below, the capital gains tax is 0%. For taxpayers in the 25% tax bracket (or above that mark), the capital gains tax is 15%. So let’s say you bought Apple’s stock (1 share) at $100 on April 1^st. On June 1^st, you sold the stock for $250. First of all, congratulations! Second of all, the price rose by $150. That is your profit. But wait; this is America. You pay taxes on that profit? How much? Fifteen percent of the $150, or $22.50. So your real profit is $150 - $22.50 = $127.50. Again, congratulations!

Click on THIS LINK to the Wall Street Journal article about 2011 tax law changes to acquaint yourself with other new changes!

http://online.wsj.com/article/SB10001424052748703675904576063903166546250.html?mod=WSJ_PersonalFinance_RightMostPopular

"Why?", you ask...

After the enormous residential real estate bubble burst in 2008, followed by a 3,000 point crash in the market in the fourth quarter of that same year, America was forced to take a REALLY good look at its financial position. If you’re like me, you just graduated college and know relatively little about investments or what to do with your first paycheck beyond buying a new iPod and some awesome, and incredibly shock-absorbing running shoes. And then you see the financial mess that has impacted the nation, and you may  wonder if what you could be doing with your income, whether meager or plump, could prevent you from suffering financially like the rest.

That’s the purpose of this blog. I’ve noticed how little my counterparts – recent college graduates – actually know about personal finance. I’m no whiz, but I have a passion for personal finance for a reason unknown to me. And I have a responsibly to share what I’ve learned.

Debt stresses me out. You, too? In this blog, I plan to present practical ways to help pay off college loans, car payments, and credit card debt you might have racked up for “must-have” purchases. I will define terms that are thrown around on the news all the time so that you can understand what on earth they’re talking about. I’ll present a digested version of relevant articles from the Journal and other business publications, and applications for that new information. I will also present my own strategies for investment based on my own experience and what I’ve learned from personal finance books, newspapers and business magazines.

I’ll always cite sources, so that you can easily refer to the sources I use and so that those authors receive the credit due to them.