College Student Financials

2006-04-12T08:34:00.000-07:00

The blog has moved!

I have been having some trouble with Blogger recently so I decided to stop being lazy and just install some blog software on my webserver. I installed WordPress and have moved all of my old posts over from blogger. I am just working on updating some of the links within the posts, but otherwise it should work fine. I will be moving the comments over from the old site later this week as well. Please update your links to the site and RSS feeds accordingly.

Enjoy!

2006-04-07T08:12:00.000-07:00

My first sale(s):

Last week I sold stocks that I owned for the first time. I think this would normally be very nerve-racking for a person, thinking "what if it shoots up after I sell it?" or anything of the sort. This was made much easier because I needed the money in my account to pay my taxes, so it didn't really matter if it sky rocketed or collapsed after I sold it. Would I be disappointed if it shot up after I sold it? Yes, but as I said, I have to pay taxes, so not a big concern. Both of the stocks that I sold have stayed close to the price I sold them at, so it hasn't bothered me yet, we will see in a few weeks.

I think needing money to pay taxes is a good reason to sell some stocks. Needing money to buy new shoes is not. If you are planning on purchasing a car in a year, start stocking money away in an index fund, and then take it out when you are ready to purchase a car. Do the same if you are going to buy a house or anything else major. When you invest, you should plan on keeping money in the market for at least a year in order to avoid tax penalties that you have if you take it out within that first year.

Remember, you want to buy and hold until you really need the money!

2006-04-01T20:17:00.000-08:00

Feeling overloaded from too much personal finance information?

I just found a great article about avoiding information overload.

Let me know your thoughts on it!

Sorry, I needed to make a half-way decent April Fools joke on someone!

2006-03-29T08:29:00.000-08:00

A thought about this weekend:

So I went away this weekend and heard one of the most horrifying quotes ever: "Yeah, my girlfriend is a vegetarian and I can't cook, so I go out to eat for lunch and dinner almost every night."

I cannot think of many worse ways to spend money than to go out to eat everyday. Think of how much money you are wasting in doing that? Not only are you paying probably double what you would pay to make food, but you also waste gas and time going to and from the place. He isn't going out to fast food places and getting the dollar meal either, he is going to Panera a lot of times and Subway other times. Looking back at my last job and how much money I spend on getting lunch every day, I can't imagine doing that every night as well. I feel so stupid knowing that I went out to lunch 3 days a week and wasted $21 or so every week. Now if he spends 7 dollars for lunch and dinner every weekday, that's $63 just on his food, plus if he takes his girlfriend out to eat for dinner Friday, lunch and dinner Saturday and the same again Sunday, that's probably another $175 for a grand total of $238 a week!

How about instead he just puts that into a checking account? He would have over $12000 every year! Now imagine the possibilities if it were to go into an index fund at the end of each year and earn around 8% every year? After the first year he would earn over $1000 on his investment. If he invested the $238 a week into the index fund instead of a lump sum at the end of each year he would earn even more money. So tell me again why you would go out to lunch every day, or three days a week, or more than one or two days every week?

Track your spending and cut out most of the unnecessary stuff today!

2006-03-20T10:30:00.000-08:00

Just to clarify my last article:

It seems there was a little confusion about what I said in the last article dealing with when to, and not to use your credit card. If you are able to pay off your card every single month, then by all means use the card for all your purchases. However, if you ever get a little behind, even if it's only $25 dollars, you need to stop using the credit card to purchase everything. This is how people end up in credit card debt. First they say only have a $25 balance is okay, I will be able to pay it off next month, then the next month they have $100 balance and say oh I am getting a big pay check next month I will pay it off then, then you are thousands of dollars in debt and your minimum payment is more than $200. DO NOT LET YOUR CREDIT CARD DEBT GET THIS WAY! In fact, don't get into any credit card debt!

2006-03-16T07:42:00.000-08:00

What not to buy with a credit card:

The following items are things that you should not be using a credit card to purchase. After you read them, I will explain why it is a bad idea:

1. Groceries
2. Gas
3. Coffee
4. Fast Food
5. Restaurant Bills
6. Tobacco Products
7. Alcohol
8. Gifts
9. Rent
10. Utility Bills (electricity, Heat, Cable, ect.)

Why is it such a bad idea to use a credit card on these things? None of these items hold any value! Groceries, gas, and tobacco products will all be gone within a week or two, why would you want to be paying them off for months? If you are going to take time to pay something off, and pay extra for it via interest, you should at least still have it in your possession while you pay it off. Coffee, fast food, restaurant bills, and alcohol fall under basically the same thing, but they are gone even faster. Why would you want to pay interest on your medium mocha latte grande what ever it is from Starbucks, or take 4 months to pay off a 99 cent cheeseburger from Wendys?

"What about gifts, why can't you put them on your credit card? The stuff I buy my ____friend is expensive!" So why shouldn't you put them on your credit card? Once you give the gift to your significant other, it is not longer yours, and no longer holds any value for you. The person you gave it to may love it, or be able to pawn it and get money for it, but you will never be able to. It is basically the same as the choco latte mini with cream you got from Starbucks yesterday (Can you tell I don't like Starbucks yet?). Don't be paying for a necklace for 6 months after you gave it to someone.

Rent and utility bills are the worst things to be putting on your credit card. You have already used the service up and now you are going to pay for it over time and pay interest on it? If you can't afford to pay cash for your cable every month, cancel the cable. If you can't afford to pay your rent, it's time to start looking for cheaper places to live. If you use up too much electricity, turn the lights off when you aren't in a room, or buy energy saving light bulbs. You shouldn't have to pay interest on your cable bill, it already costs too much to have cable.

So there has to be some exception to this right? I mean, I am special so I can use my credit card to do this right? Well there is really only one way where it is okay for you to use a credit card to buy these things, and that is if you pay the credit card off completely every month. This way you never get charged any interest. However if there is ever a single month where you don't pay off the card in full, it's time to stop using the card. Don't make excuses, or say next month will be better, just stop using the card. This is how people get into trouble and it's a good way to piss all your money away on paying interest charges.

Say no to credit card balances!

2006-03-13T10:40:00.000-08:00

Why I should have cared about money sooner:

I first started this blog a little while after I got laid off from my previous job. Not having a job made me realize that money is important, and I should do more than get my paycheck, pay my bills, and spend the rest. When I lost my job, I was fortunate enough to have some money saved for taxes because I was self-employed. The problem is, I used up that money, and now I have very little left for taxes, and the tax man wants a lot more than I expected. Now I'm left trying to shake some money out of my dried up money tree. So for the next money I will be looking for payment plan options to pay the money I owe over time. I'm hoping I don't get screwed over with the interest rate on this like I do with my credit card. Luckily for me, I am now an employee of a company, and they take care of taxes for me.

2006-03-03T12:19:00.000-08:00

Lower your credit card's interest rate:

As discussed in my post yesterday, one way to reduce the time it will take you to pay off your credit card debt is to lower your interest rate. David Bach, author of The Automatic Millionaire among other books, says the best way to lower your interest rate is to just call the company and ask. He says when you speak with the first customer service representative simply ask them what your APR is, then ask to speak to a manager. When you speak with the manager tell them that you would like to have your interest rate lowered or you will be transferring your balance to another card (Use any card competitor: Citi Bank, MBNA, Chase, ect). Most of the time they will be willing to do this for you right away, because even if they lower the rate significantly, they still make plenty of money off of you. If this manager tells you no, ask to speak with their supervisor. Bach says eventually you will get someone who will lower your rate for you.

Well, I have tried this method, and failed. I have a PayPal Visa through Providian and they refuse to lower my interest rate. Every time I call they tell me that they review each customers account every 6 months and make needed changes to the account at that time. I have asked to speak to managers, their managers, and then their managers. No matter what I get the same scripted response. I asked to speak with the credit review department and told that they are not a "phoning department." So, playing stupid, I said "the credit review department doesn't have any phones? That seems strange." and the manager replied "Sir, I didn't say that, but they do not speak with customers. " so I proceeded to say thanks for nothing and hung up.

Now I do believe that calling and asking for a lower interest rate will work for many card companies, but as you can see, it isn't the end all be all of lowering your interest rate. So what is one to do when this happens. You have two main options, either suck it up and deal with it, or apply for another card and transfer your balance. If your card is maxed out, or close to it, it is unlikely that you will be approved for another card, so it's time to start paying it off as fast as possible. Then once you have half of it paid off, you are much more likely to get approved for another card.

You need to start this today, every day that goes by, you pay more interest to the credit card company.

2006-03-03T08:21:00.000-08:00

Goals Update:

At the end of 2005 I had a post about goals for the new year and beyond. So having just read this post at Free Money Finance I decided to update you on how I have progressed with my goals.

The first goal I listed in that post was to determine how much you spend every week. I have gone a step further and set a spending budget. I give myself $25 dollars between each paycheck for spending (I get paid every two weeks). This may not sound like much, but unless I'm doing anything big, like skiing, I don't spend much money.

The second goal I listed was to put the money you aren't spending into a high interest savings account. I have opened two accounts, one at Emigrant Direct, and one at ING. I am building an emergency fund in the Emigrat Direct account and I am putting together money to open a ROTH IRA in the ING account. I set it up so that each account automatically gets about 7.5% of my paycheck each pay period. With it automatic, I never think about it or worry about it.

The third goal I discussed was a yearly financial goal. My yearly financial goal is to open a ROTH IRA and have $2500 in it by the end of the year. I will be opening the account this month and set it up to be automatically funded through my ING account.

And finally, a long term financial goal. I would like to retire before the age of 51! 51 seems so far away, over 30 years in fact, but with a ROTH IRA I will be taking the first step towards accomplishing it.

What are your goals?

2006-03-01T07:56:00.000-08:00

Do you know how long it is going to take you to pay off your credit card debt?

Do you know how much credit card debt you have?

Do you want to pay it off and have money to invest?

Time to do something about it. You need to take the following steps of action in order to find out your total debt and start paying it off:

1. Call each company that you have a credit card with and find out what the balance is on the card. (If you can do this online feel free to do so)

2. While on the phone find out what the interest rate is on the card. (You usually can't do this online)

3. Add up the total from all of the companies and write it down in large print on a full size sheet of paper.

4. Tape this paper up some where that you will see it several times a day.

5. Set a reminder in your cell phone that shows you how much debt you have and goes off once everyday.

6. If the interest rates on your credit cards are all fairly close (within 5% of each other) you will be paying off the card with the highest interest first. If you have a card that has interest much higher you will be paying that one off first. (Look for an article soon on how to lower your card's interest rate) Use a loan calculator to determine how much you should pay each month and how long it is going to take you to pay off the card. To use this, first put in how much money you owe on the card, and then what interest rate you are paying. For the term, it really depends on how much you owe and how much you make each month. You should use half of your pay each month to pay this card off, so play around with the term to figure out how much you need to pay each month and how long it is going to take.

7. Now, what should you do with the other cards while you pay that one off? You of course still have to pay money to them each month, but how much? I would say pay the minimum plus at least $15. If you can't afford to pay more than the minimum, then don't! Do not get behind on payments however, this will destroy your credit rating.

8. Once the first card is paid off, repeat steps 6 and 7 until all of your debt is paid off!

You should be able to get yourself completely debt free in less than 5 years. Yes I realize that 5 years seems like forever, and it isn't worth it to get out of debt if it is going to take 5 years, but either you start towards getting out of debt today or you will be in debt forever.

Make sure you update the "how much you owe" sign that you have posted each month so that you can visibly see you are getting out of debt. If you don't know how much you owe, you will never get out of debt.

Take action today!

2006-02-27T07:45:00.000-08:00

Competition Update:

When I first started this blog I talked about a competition that I was having with some of my residents at school. First, let me give you the short update: We all suck! We have all lost money! Now, let me give you the longer update: I am winning! Here is how it breaks down as of Friday 2/24:

1	Me	$492,885.68	-1.42 %
2	Resident 1	$475,153.84	-4.97 %
3	Resident 2	$461,722.24	-7.66 %
4	Resident 3	$461,562.79	-7.69 %

As you can see from the table, I have made the least bad decisions out of everyone! Not really something to be proud about, but I am winning at least. The two worst decisions I have made so far are to purchase Google after they reported earnings and it dropped, only to have it drop more, and to purchase GM thinking it might bounce back. I have sense dumped both stocks and hope that some of my other stocks will make up for their huge losses. My biggest gainer thus far has been Taser (TASR) which has gone up over 21% sense I purchased it. Too bad I didn't dump all my virtually and real money into that! The competition ends in about a month and I have been in first place sense week two, let's hope it stays that way.

2006-02-24T10:45:00.000-08:00

It has come to my attention:

I'm not sure if anyone actually reads this blog. I don't really mind much, but it would just be interesting to see if anyone reads this? Leave a comment, say something useful, or something useless if you actually do read this. I like posting it either way, and I can refer people to it whenever I am discussing money so they can read about it.

Let me know!

2006-02-15T07:44:00.000-08:00

Worry about other things than money:

If you have recently become interested in getting rid of debt, or investing in the stock market, or just money in general, don't let it control your life. Don't spend all of your waking hours worrying about how much debt you are in, or which stock or fund to invest in next. Go out and do other things, talk to your friends about other things than what Jim Cramer said on Mad Money last night. I, for example, finally got up off my butt after 4 years of not running and went to the gym on Monday and again yesterday. In high school I ran a minimum of 5 miles a day 5 days a week so I figured I would easily be able to run for 20 minutes. I was horribly mistaken, I had to stop after 10 minutes of running to walk and stretch, and the final 10 minutes of running almost killed me. This may be a little off topic of my normal financial issues, but take care of your self physically, not just financially.

Invest in your health too!

2006-02-13T08:38:00.000-08:00

Here's a great way to waste some money:

If you are a MySpace user, which most college students are, you probably know about Christine Dolce, aka Forbidden (explicit Content!). She has a very good agent, manager, or whoever it is that runs her MySpace site. She posts almost nude pictures of herself and talks about a new clothing line that she has recently come out with called Destroyed Denim (explicit Content!). The concept of this clothing line is you can either send in your own pair of jeans, or purchase a pair of jeans from them, and they will essentially destroy them. This means put rips and bleach stains on them. If they are going to destroy your clothes they should pay you to do it right? Nope! You get to pay them between $50 and $75 for them to destroy your clothes! What a waste of money!

Come on folks, you can't destroy your own pair of jeans? Here's an idea, do something active, wear them hiking, wear them when you work on a car, go roll down a hill jeans on! Better yet, send me your jeans and $10 plus the cost of shipping and I will destroy your pants for you. There you go, save yourself $65 and send me the pants. Or don't waste any money at all on this ludicrous idea and invest your money.

2006-02-10T17:34:00.000-08:00

I can't save enough money for the minimum investment of a fund:

I know a lot of people read my previous post about investing in an Index Fund and when you saw that I said you could open one for as little as $1000 you said there is no way I'll ever be able to do that; I can barley save $100. Well fortunately for you, you only need to save half of that. T. Rowe Price has what is called a Systematic Investment Plan which means you only need an initial investment of $50 as long as you continue to invest $50 every month from here on out. I know that every college student can easily come up with $50 every month, so there are no need for excuses. I would recommend that you start with the Equity Index 500 Fund (ticker: PREIX) because this is their Index Fund and you should always start with an Index Fund.

Just think, if you invest $50 a month for a year, you not only have $600 instead of wasting it on beer and fast food, but will have earned enough in returns to buy a 12-pack or three. Clearly making your money work for you, rather than you working for your hangover is the way to go. Grab $50 bucks out of your checking account and sign up for one of these Systematic Investment Plans!

2006-02-10T17:09:00.000-08:00

Making some money:

Well after over a month of having my money in the stock market, I have finally started to see some return on my investment. I made one bad choice on a stock, well more like bad timing on a stock purchase because I think it will end up being a strong stock, one okay choice, it fluctuates quite a bit from week to week so it is hard to read, and one great decision on a stock. The return is only 2.88%, but that is still better than it sitting in my checking account or, what it would more likely be doing, getting spent.

You might say Mike, you are such a hypocrite, you told us that we should start by investing our money in an Index Fund, and you are telling us that you have no money in an Index Fund, are you trying to screw us over so you are the only one making money? My answer is NO! I wasn't educated enough when I started investing and that's why I invested into straight stocks rather than any sort of fund. That's also why I started this blog, so that other people wouldn't make the same mistakes that I made! I'm saving up my paychecks now so that I can have enough money to open up an Index Fund. In fact I should have enough within two weeks.

Even though it was some what of a stupid decision for me to put money into straight stocks rather than a fund, I did do something right. I stopped being lazy and opened a brokerage account. I had been saying I wanted to do it sense high school but I always thought that it was too hard. I realized I was stupid and I should have done it when I got my first job. Now I am so happy with myself that I actually did it and I am interested in saving some of my money rather then spending it all.

Invest! Invest! Invest!

2006-02-03T10:55:00.000-08:00

Confused? Have Questions?

ASK! Ramit has a great post in his blog about asking questions. If you are confused about anything I talk about in this blog, or you have a question about something else, leave a comment and ask. Or if you wish, you can e-mail me too.

2006-01-30T13:00:00.000-08:00

I'm so scared and confused about what to do with my money:

Many people, not just college students, are too worried about what's going to happen with their money if they invest it that they just let it sit in a checking account all their life. This may be okay for people approaching retirement, but it is not okay for college aged people. Being young, you can afford to take risks, and if you make a bad decision, you will still be able to survive. Once you purchase a house, have children or do anything else that requires you to give a major chuck of your check to them, you will need to lower your risks a bit. Now however, its time to take a risk.

Many people read financial information, and it tells you that if you invest you can make tons of money with very little investment as long as you keep it in over a long period of time. Usually this information doesn't tell you what to invest in, or how to do it, in order to make all of this money. So let's use this entry in the blog to tell you what steps you need to take to start investing. You should already have a high interest savings account if you have been reading this blog for a while, almost every post I make, I discuss these accounts. This will be one of the last times I talk about them for a while.

So once you have a good chunk of money in one of these savings accounts (NOT YOUR EMERGENCY ACCOUNT!) it's time to open up a brokerage account. A good chunk of change means at least $500, but preferably $1000. But there are so many brokerage companies, I don't even know where to start you might say. Well hold on a second and keep reading! I would recommend going with ShareBuilder because it is only $4.00 for purchases. It costs more than that to sell, but that is good, because you should not be selling your stock anytime soon. Another good company is Scottrade, which is what I use. It is $7.00 to buy and sell stock with them.

So you have filled out all the forms for the brokerage saying you aren't an illegal person and you have your account open, transfer money into it! Make sure you find out if there is a minimum amount you need to trade at a specific brokerage. Scottrade, for example, requires at least $500 to invest. Don't just jump in and buy the first stock you find, or one that is mentioned in the Wall Street Journal, you need to do some thinking before you give a company your money. Your first investment should be an Index Fund, not a single stock. This makes it much harder for you to screw up and lose all your money get mad at me and never invest in the stock market again. This site has a list of Index Funds available, the site is a little old, but all the funds still exist as far as I have seen. You can open in Index Fund with as little as $1000, if for example, you chose the Kent Index Equity Fund. Pay close attention to the Expense Ratio Column, this tells you how much the Fund Manager charges you to hold a fund with them. Stick with a fund that is listed in the top half under S&P 500 Index.

How do I buy this fund you say? Well go to your brokerage website and go to the trade section. Then select the Mutual Fund option and say how much money you want to invest in it. Remember you need to invest at least the minimum in it in order to invest at all. Mutual funds are only bought and sold at the close of the market, 4 PM EST.

Sit back and watch your money grow. If it doesn't go up immediately, don't worry about it, don't even check it everyday, check it once a week at most.

2006-01-19T14:56:00.000-08:00

Why budgets don't work for college students:

A lot of financial advice columns and books will tell you that you need to have a budget in order to correct save and spend money. I think making a budget is a useless waste of time for a college student. The spending of someone in college is so random that most will find it hard to budget how much they will spend on food or clothing each week. Some weeks you get asked to go out to dinner with friends 5 times, others you might not be asked at all so you don't spend any money. Setting up a budget also takes quite a bit of time, and even though college students usually have plenty of time they are usually lazy when it comes to spending time on things that don't have instant benefits. So how can you prevent yourself from saving money if you don't budget exactly where you are going to spend it?

It's not very hard to do at all. You need to pay yourself before you pay anyone else. Every time you get paid, whether you have a steady job and you get paid every week or two, or you do random jobs here and there and might only get paid once a month or three times a week, give money to yourself before you give money to anyone else. Most college students do not have the option of contributing to any sort of retirement plan, so that means the government will be the first person to take your money when you get paid, through federal and state taxes along with social security. Now before you give anyone else money, the credit card company, the bank for your car loan, or the school for tuition, pay yourself!

You should take between 10 and 20 percent of each paycheck and put it into your high interest savings account. 10 percent is the absolute minimum you should take out of each paycheck. 15 percent is what you should be averaging each time you get paid; when you get paid more than usual put 20 percent away and when you are a little strapped for cash you only put away 10 percent. Never should you pay someone before yourself! No matter how strapped for cash you are, you need to ensure you pay yourself first! This way you will always be saving money before it all runs out.

Paying yourself first prevents what usually happens to people trying to save money. They say after I pay off my bills and buy everything I need to for the week I will put all of the rest of the money in my savings account. The problem is there is never money left over, or if there is, it's so little they say its not really worth saving. By paying yourself first you prevent yourself from spending that extra money you don't need to spend. This is kind of like budgeting, except instead of suggesting to yourself how much you should spend on stuff each month it actually controls it. Try this for a few months and I think you will be amazed at how much you save!

2006-01-12T09:47:00.000-08:00

What should you do when the money runs out?

Nothing, you are screwed, you should have set up an emergency fund to avoid running out of money when you lost your source of income. If you did lose your job, and you need a source of income because you have no money saved, its time to suck it up and go work in retail, or in a grocery store, or anywhere you can get money. It doesn't matter if you are above working in retail, you aren't above the repo man who is going to take all of your stuff away when you can't pay the bills. So go to work.

Now to what you should have done before you ever lost your job, or what you should be doing now that you are working. Time to set up an emergency fund. This should be a savings account that you will not be able to access at an ATM. Don't open up this account at your current bank because it is too likely that you will just transfer the money to your checking account and spend it when you decide you need a new TV or some more beer money.

Your best bet, as I have said numerous times before, is a high interest savings account at either EmigrantDirect or ING Direct, both banks make it easy to transfer for money from your current checking account into them, and if need be, transfer money back into your current checking account.

Now you might say, but I can only afford to pay my bills each month and have a little money left over for food and a little spending. Well it looks like you are going to eat some cheaper food and stop buy so much clothing or beer. Every time you get paid, take 5 percent of your pay check and transfer it to your new savings account. Better yet, if you have direct deposit at work, set it up so that 5 percent of your check (or what ever dollar amount that usually is) goes into that account.

How much money do I need in this account you might ask? First you need to figure out about how much you spend each month, this does not mean how much you pay in bills, but the total amount you spend including food and shopping each money. Multiply this number by 3 and that is how much you need. That's right, you should be able to live off this account for 3 months with no change in lifestyle at all if you lose or quit your job. Once you have 3 months worth of savings in that account, don't touch it!

The money that you were saving for that emergency fund will now be able to fund your investing...More to come on this later.

2006-01-11T11:50:00.000-08:00

In college and don't have a credit card? You need one:

If, for some crazy reason, you have made it to or through college without a credit card, I applaud you! I do not think I know any college student that does not have a credit card. The problem is, if you ever want to buy a house, or a car, or anything that will require you to take out a loan, you need to have some credit history. Without a credit card, it is very hard to have a credit history.

Let's set a few ground rules before you apply for a credit card:

1. NEVER, EVER, apply for an in-store credit card. The interest rates a way too high, and you can only use them at one store or chain.
2. If you won't be able to pay your balance in full at the end of the month, don't use the card!
3. Once you get your first card, don't cancel it! Keeping a card for a long time helps your credit score tremendously.

Okay so now it's time to apply for a card. Ask your parents what cards they use and like. Find out what your friends are using for cards. Go to your current bank and find out if they have a card.

When you apply make sure you tell them that you are in college, most companies will throw credit cards at you if you are a college student. Second, check the interest rate! Not just the introductory rate, the actual rate you will pay after the introductory period expires. This should be 15% at most. Some places will give you an instant decision about your application, others will take time, and call you to verify information before they process it.

Once you get your first credit card make sure you follow these easy rules:

1. Don't carry it with you everywhere! Only bring it with you once or twice a month, that way you aren't tempted to use it.
2. Don't buy things that you use up quickly with it, such as food, movie tickets, ect. These things are gone before you even get the bill. If you can't afford them, don't buy them!
3. Pay off most of it every month. Carrying a small balance ($75 or less) shows lenders that you are able to handle carrying some amount of debt.
4. Don't say "Oh I will just pay it off next month." Next month turns into the next month and then it ends up being a year and your card is maxed out. If you start to get in trouble over using your card, ask your parents or someone you trust to take it and hide it so you stop using it and pay it off.

You have taken one step towards financial freedom!

2006-01-11T09:49:00.000-08:00

So you thought credit cards were free money?

Well I sure if you are interested in personal finance you have learned by now that credit cards are not in any way free money. If you are a college student you are likely paying at least 20% interest on your credit card. That means if you have $2000 racked up on your card you are paying $400 a year on that credit, or you paid $60 for that $50 pair of jeans you bought a year ago and you haven't paid off yet. Now that doesn't seem too bad does it, I mean $10 over a year is only 2.8 cents a day right?

Well think for a moment what would have happened if instead of paying $400 in interest last you you invested it in an index fund? (A list of great index funds can be found here) If you earned a conservative 8 percent on that money you would have $432. Again $432 dollars doesn't seem like much, but the next year you would have $456.84, then $493.39, then $532.86. In 8 years you will have doubled your investment! Or instead you could just use your credit card with 20% interest and double the amount you owe every 3.8 years. So in 4 years you could end up with -$800 instead of -$400 or in 8 years you could end up with $800 instead of $400...you decide!

Pay off your freakin credit cards and invest!

2005-12-30T10:28:00.000-08:00

Why Motley Fool Sucks:

For anyone that reads financial publications online, they are likely to know about fool.com, the Motley Fool. They are tons of articles on there about investing in Mutual Funds, IRA's, stocks and bonds, but the problem is that every article is an advertisement. Every article somehow ties into one of the pay services that they offer and how you can get a thirty day free trial. This is shitty way of marketing. If you are going to offer free articles on your website, don't make all of them ads, that sucks. Not only does each article end as an ad for the service, but there is always a huge ad down the side about the same thing. Many of their articles also make you sign in in order to read them; what a waste of time. If you are looking for online financial publications don't be a fool and waste your time with them.

2005-12-27T09:00:00.000-08:00

Goals:

I mentioned in a previous post about having a financial new years resolution. Well being as the new year is quickly approaching, it would also be a time to set some financial goals for the future. It will be tremendously helpful if you have already figured out how much money you are spending each week. How far in the future should be the question you ask immediately after reading that sentence and there are a few answers to that question. Lets break down financial goals for college students into 4 categories, I know it sounds like a lot but it isn't bad at all.

1. Daily financial goals:
You should already now how much you spend each on average each day because you kept a notepad with you and wrote down everything you spent money on for a week. When you get up each morning (or afternoon as many college students do), decide if you actually need that 2 dollar coffee and the 2 dollar bagel or muffin. Could you instead go to the grocery store and buy a pound of coffee that will last you for a month, and a dozen bagels for the same 4 dollars? It might cost you a few dollars more, but remember you just got a months worth of coffee and 6 days worth of bagels which means it costs a very small fraction of what you would have spent that month for coffee and bagels from the coffee shop.

Now you may say, but Mike, I don't buy coffee every day, I don't even like coffee! Well, look at that notepad you have that you used to keep track of your spending for the week. Do you go out to eat everyday when you work? Do you buy 30 dollars worth of alcohol each week? Everyone has something that they spend money on each week that they could easily cut back on and not miss much at all. This is talked about in great depth in a book I mentioned previously. The author calls this a person's "Latte Factor" and it is anything that a person buys everyday, or every week, that they could cut back on and instead use the money to invest.

So in short, your daily goal will be to not spend money on your "Latte Factor" and instead keep the money in the bank.

2. Weekly financial goals:
If you have determined your "Latte Factor" and you are actually making sure that you are keeping the money would have spent on it in the bank rather than spending it, you should now have extra money in the bank. Instead of leaving this in your checking account where it will earn now interest, move it over to a high interest savings account. That way your money will be making money for you. The amount of money you save every week should be the same, or very close to the same, so set up your savings account so that it automatically deducts that amount from your checking account every week. This means that you do not even need to think about moving the money each week, and it also means that the money doesn't stay in the checking account and you end up spending it. You will see over the course of a year that this money adds up to be a lot. Once you have a significant amount in your savings account don't just go out on a shopping spree...Keep Saving!

3. Monthly financial goals:
Each month you should come up with a new monthly goal. Perhaps you don't have a job right now; this month your goal should be to find a job. Maybe you want to start investing in the stock market; pick five stocks and watch them for a month to see how they do before you just jump in and invest in them. Maybe you have a lot of credit card debt, use the month to gather all of your statements and figure out how much debt you are in. You will never pay off debt if you don't know how much you have. (More to come on this in a later post) Opening a high interest savings account should be one of your first monthly goals. In fact it takes about 10 minutes, not a month, but don't force yourself to do too much at once and then become upset because you didn't meet a goal.

4. Year financial goals:
Each year you should be setting at least one financial goal and that goal should be I am going to save X amount this year. That does not mean however at the end of the year you are going to see how much money you have in your checking account and saying "oh I dont have enough" and forgetting about it. No, you are instead going to have opened a savings account that I have already mentioned several times in this post, and you are going to set it up so that it automatically deducts the amount you want to save for the year divided by 52 year week. (If you want to save $5000, there are 52 weeks in a year so each week you will save $96.16) This way you will never have to think about saving the money, it will just do it.

In a upcoming post I will talk about IRA's and why you should be investing in one. If you are currently in college, and plan to even retire, you need to open one now, it may mean that you can retire early, or just that you can retire period. Many people do not realize the importance of saving a little when you are young so it can turn into a lot by the time you are old rather than saving half of your paycheck each week when you get into your 40's, 50's and 60's so that you can scrape by when you retire.

Start Saving TODAY!!

2005-12-20T17:33:00.000-08:00

Wasting money on the bank:

When most college students get paid, they either have their money directly deposited into their checking account or they get there check and deposit it into a checking account. If you are keeping some money in the bank for more than a few weeks, why would you leave it in a non-interest paying checking account? Secondly, why would you put it into a local bank's saving account where you earn less than 1.0% interest?

Transfer your money into one of the popular online banks, Emigrant Direct bears a 4.0% return and ING Direct bears a 3.75% return. These banks are both FDIC insured so you don't have to worry about losing your money or anything like that. They also do electronic transfer so if you need your money, you can just transfer it back to your checking account. ING also offers mutual funds and CDs you can invest in as long as you have a savings account open with them.

Every time you deposit money into the bank, the bank is automatically making money off of it by lending it to other people and charging them money on the loan. Shouldn't you make back some of that profit; you are the one giving them money to use. Use a bank that pays a decent interest rate on the money you deposit.

2005-12-19T12:23:00.000-08:00

Personal finance resolution:

The new year is quickly approaching which means it is time for everyone to make resolutions that they will keep for a month and then give up. People will buy a gym membership and go to the gym for a week and stop going. Others will give up cigarettes for a week and then get over-stressed and need one to take the edge.

Well here's a resolution that will only take a week. Get a small notebook and a pen, or if you have a PDA that works too. Write down every cent that you spend that week, if you pay a phone bill or cable bill, write it down! If you buy a coffee every morning, write it down every morning. It doesn't matter how you pay for it either, whether it be cash, check, debit, or credit, write it down! Make a note of which source you are using for each purchase (again cash, check, debit or credit). At the end of the week add up the total amount of money that you spend, I bet it is a lot more than you thought you did each week. Buying a $1.37 coffee each morning doesn't seem like much, buy 5 days a week means that you are spending $6.85 on coffee each week. Again that still doesn't seem like much, but it means $27.40 a month and 328.80 a year. If you are currently a junior in college, that means you have about 45 years until you retire, that means you will spend $14796.00 dollars on coffee.

Remember also that most people don't just buy a coffee, they buy a doughnut, or a muffin, or bagel. They also probably buy an afternoon snack as well. So lets say you spend as little as 5 dollars a day on coffee and snacks including the weekends. That means $35 a week, $140 a month, and $1680 each year. If instead you invest $1680 a year into an account that has an 11% return and leave it until you retire you will have over $1.6 million. (This assumes you are currently 20 years old and invest that amount into the account every year until you retire at the age of 65)

As for now, don't worry about investing your money into a retirement account, just figure out how much money you are spending each week. I would strongly suggest you get your hands on a copy of either Microsoft Money or Quicken. This makes it much easier to track all of your expenses. Almost every bank and credit card company will let you download your records into these programs so you don't even have to make the effort to type each transaction in. When they make it this easy you might actually enjoy tracking your money.

2005-12-17T20:18:00.000-08:00

A must read book:

Today my girlfriend and I were very bored and needed something to do. Rather than waste investable money on going to the movies we decided to go to the bookstore and read the books for free. I decided to find a good personal finance book.

I had read an article last night by David Bach on Yahoo Finance. He is the author of several personal finance books including Automatic Millionaire. He has a column that goes by the same title on Yahoo and I read the 4 articles he posted on there. After enjoy those columns I decided to pick that book out and start reading it. I must say this is an excellent read and it should be required for any college student looking to become rich. The book will not make you rich during your college years or even 15 years after you are out of college, but it will teach you ways to stay debt free and have well over $1 million when you retire. Many articles will tell you $1 million is the minimum anyone needs today to retire comfortably at the age of 65.

Bach's concepts are very simple, so simple in fact that many people will not believe they work, but if you do the math you will find they most definitely do. The main idea is to pay yourself before you pay anyone else including credit card companies, cell phone companies, tuition, ect. Most college students do not yet have the option of getting involved in a 401(k) or 403(b) at work so the one of the most important things to do would be to open a Roth IRA. You can get a lot of information about Roth IRAs at www.rothira.com along with www.fool.com.

I read about half the book at the bookstore and felt it was so good that I would in fact buy it. This is quite the feet for me seeing as I very seldomly read books unless required by a class. I read 127 pages in this book in under two hours and it felt like I had only been reading for 20 minutes. I would recommend buying the book or any other book for that matter at www.half.com or www.amazon.com for half the price you would pay at the bookstore.

If you think starting to save for retirement while you are in college is too early, you are horribly mistaken, and you will probably end up not having enough money to live comfortably when you retire.

2005-12-16T20:09:00.000-08:00

A competition:

So I was talking to my residents today, many who are also interested in investing in stocks and or have started to do so recently. We decided we wanted to do what most kids do in Junior High; pick some stocks, invest in them, and see who can make the most money. The catch is that in Junior High you use fake money and if you lose all of it you just get a crappy grade whereas as here we are using real money.

We are going to each invest $500 max. We are starting shortly after the semester ends and going at least until the new semester starts. This doesn't mean that we will be selling the stock at the end of the competition to prove we made the most money, we will just look at each others accounts and see who has the highest gains from investing and subtract the cost it would be to sell the stock.

I think this will lure a lot of the people participating into purchasing very low cost stocks, mainly below $10. This article, 13 great stocks under $3, gives some insight into purchasing low cost stocks while still keeping the risk fairly low. I found the tool they suggest somewhat difficult to use and wondered why the authors recommendations wasn't one of the built it searches. Remember if you use this tool, the stock ranked number 1 doesn't mean that it is actually the best choice. Using the authors advice you will end up with a lot of busted tech stocks as he mentions at the end of his article. Use a reference like Yahoo Finance to chart the stock sense its IPO to see if the stock has busted.

**UPDATE: We decided doing this would be a fairly stupid idea as we would end up paying more in commissions than what we would probably earn. Instead we are going to use the Market Watch Game to see who can make the best investment decisions without actually losing or gaining real money. The winner will get $20.00 which means it will only cost each play $5.00 if they lose, less than most brokerage firms charge for commission.

***UPDATE: As of 1/13/06 at 13:46 I am winning the competition.

2005-12-16T18:22:00.000-08:00

First Investments:

So as I said in my last post, I finally decided to get up off my ass and invest in the stock market. Seeing as I was laid off, I didn't have that much money to throw around.

I had been given some great reviews about a specific brokerage firm so I decided to open an account with them. You should do your own research before opening an account and decide which firm is right for you. Some of my residents for example found one that lets you trade for $4 on Tuesdays but any live trades that you make are $14. I went with a company that has a flat fee of $7 all the time. I'm not doing any day trading so going with the other company might have been a better idea, but I'm satisfied thus far.

The firm I chose requires a $500 minimum investment to start trading so I figured I would send my money over the web and get going the next day, but apparently the firm had a problem with their e-check provider and canceled the service which meant I had to write a check and hand deliver it or mail it. Being in school and not wanting to waste money on gas driving 30 miles to deliver a check, I wrote a check and sent it to them, this meant I had to wait 6 days before I could start investing. I think this was actually good thing because it got me to relax and actually look into some stocks rather than jumping in with no research. I seem to do this often when I get interested in it. I jump right in and think about it afterwards and half the time regret doing it so quickly.

Well after talking to other students already investing in the market I found some stocks that looked good and I found some on my own browsing the web and reading the Wall Street Journal. I made my first investment on Tuesday and my second on Wednesday. The first was a fairly well thought out and researched investment, the second on the other hand was not so well researched. Yesterday the second company released its second quarter earnings and I lost a few dollars on that stock today. I feel however that this stock will rebound dramatically after it reports it's third and yearly earnings so I am not very concerned.

2005-12-16T17:59:00.000-08:00

A little about the author:

I am currently a student and a Resident Advisor at the University of Massachusetts Lowell. I am majoring in Management of Information Systems and Marketing. I would eventually like to either start my own business or work way up to become a CIO of a successful company.

I was recently laid off by a local school system where I was working as a part time computer technician*. So after hours, days, and weeks of playing playstation, I decided to finally get involved in investing. I have always been interested in the stock market and investing my money so I can earn more than the 0.05% that my savings account paid.

I recently read an article on MSN Money that stated if you were to invest $2000 a year at the age of 16, 17, and 18 into an IRA that had a return rate of 10.5% that your money would double every 7.5 years and by the time you retire you would have over $1 million. That's right, $6000 turns into ONE MILLION DOLLARS. To a person who has never had any kind of finance course that sounds almost impossible, however, anyone that knows the magic of compound interest knows that this is true.

Who wouldn't want to invest their money after this? Well, it seems a lot of people. People fear the stock market because the only thing they are ever taught about in school is the market crash in the '20's and the dot com bubble burst in the '90's. If you do a little research or ask a history professor you will find out that it is impossible for anything like the '20's crash to ever happen again due to restrictions and safety nets put in place by the SEC (Securities and Exchange commission).

I however do not fear the market. I am willing to accept the risk of losing some money in the short run in order to make money in the long run. In my next article I will talk about my opening an account and my first investing experince thus far.

*A little update, after 3.5 hours of interviewing and meetings, I was hired today as a desktop and server support person in on of the departments at UMass Lowell. Having a paycheck will be a big help in my ability to invest.

2005-12-16T13:42:00.000-08:00

The start:

After reading several financial blogs recently, most noteable www.iwillteachyoutoberich.com, I have decided to start my own, mainly based around finances of a college student along with other random observations.